In a milestone for one of Silicon Valley’s hottest companies, Facebook on Wednesday filed papers announcing a $5 billion initial public offering of stock in the world’s biggest social-networking business.
The stated size of the offering is smaller than expected, after weeks of speculation by analysts and industry observers who predicted Facebook might seek up to $10 billion. But documents indicated the figure is preliminary; the company could revise the numbers as it prepares to begin selling stock this spring.
In its filing before the Security and Exchange Commission, Facebook said in 2011 it generated revenue of USD 3.71 billion, which is an increase of 88 per cent from USD 1.97 billion the year before and 377 per cent from 2009. In 2011, its income was USD 1 billion an increase of 65 per cent from 2010s USD 606 billion. Facebook derives 85 per cent of its revenues from advertising, and the rest from social gaming and other fees.
“The company hopes to raise as much as USD 10 billion when it begins selling shares this spring …,” The Wall Street Journal said in a report.
Founded in 2004 by CEO Mark Zuckerberg, Facebook now has some 845 million active users who in all upload 250 million photos a day. According to the filing, Zuckerberg made a salary of USD 483,333 last year, in addition to a USD 220,500 bonus for the first half of 2011.
“The paperwork portrays a company that makes the vast majority of its money from selling display ads targeted to its users who have revealed to Facebook much about their lives,” the Washington Post reported.
Facebook is expected to file its paperwork several times over the next few months, updating the information it provided to the SEC on Wednesday. Meanwhile in a letter to potential investors, Zuckerberg said Facebook thinks a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services.
“As people share more, they have access to more opinions from the people they trust about the products and services they use. This makes it easier to discover the best products and improve the quality and efficiency of their lives,” he wrote.
Noting that Facebook was not originally founded to be a company, Zuckerberg wrote: “This is how we think about our IPO as well. We’re going public for our employees and our investors. “We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment.
“As we become a public company, we’re making a similar commitment to our new investors and we will work just as hard to fulfill it.” As part of building a strong company, he said his team works hard at making Facebook the best place for great people to have a big impact on the world and learn from other great people.
“We have cultivated a unique culture and management approach that we call the Hacker Way,” he said. “The word ‘hacker‘ has an unfairly negative connotation from being portrayed in the media as people who break into computers. In reality, hacking just means building something quickly or testing the boundaries of what can be done.
“Like most things, it can be used for good or bad, but the vast majority of hackers I have met tend to be idealistic people who want to have a positive impact on the world,” he wrote.
“The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo,” Zuckerberg said.
While there have been larger IPOs in the tech industry, an initial offering of $5 billion would still outrank any other Internet-based company’s debut, including Google’s initial offering in 2004 of nearly $1.7 billion. Morgan Stanley was listed as the lead underwriter of the stock offering, after beating out Goldman Sachs for the lucrative fees that go with the position. Goldman and several other firms will also participate, however.
The IPO is expected to create between 500 and 1,000 millionaires among Facebook employees with company stock.