Excitement is mounting in the tech and business community as pundits wait to see exactly how much Facebook will fetch in its IPO this week. As if the original $96bn prediction was not enough to be getting on with, the company has increased its price range for stock from $28-$35, to $34-$38. This price range would give an implied valuation for the company of more than $100bn, making it the largest IPO in history for a tech company by a country mile.
The increase in the price range comes in response to massive demand for the company’s shares: investors are obviously drunk on the numbers reported by Facebook’s official stats page. 901 million monthly active users as of the end of April, and more than 526 million daily active users on average in March 2012. There’s got to be some way of monetising that audience, right?
Well, that’s part of the problem. Facebook reported a slight dip in profits for the first quarter this year, and even issued what amounts to a profit warning to the SEC explaining that, in layman’s terms, it wasn’t really sure about how to make more money in the future. Add to that, critics are pointing to Facebook as a ludicrously overvalued company akin to the mega-valuations seen during the dotcom boom.
However, Facebook is only selling a small portion of its stock, about 12.3%, to raise around $12bn for investment. In addition, the clamour surrounding the company’s IPO can be partly put down to hunger for investment action in the tech market – there are not that many IPO’s kicking off at the moment but many investors are still looking for the next hot thing.
We’ll see in the coming days just how big that valuation ends up being (and just how rich CEO Mark Zuckerberg will become), but whether the value will last remains to be seen…