Facebook shares will cost $38 as company valued at $104bn

Friday, 18 May 2012 10:41

Facebook has valued its shares at $38 (£24) each, valuing the firm at $104 billion (£66bn) and said shares will begin trading in New York today.

Anticipated interest is high and this led to Facebook announcing that it would make an extra 25 per cent more shares available than previously planned.

The initial public offering (IPO) is set to be one of the most eagerly anticipated in history but comes from the technology sector which is littered with casualties.

Facebook, as an established brand with 900 million users will be looking to avoid the problems that have faced other household names such as Yahoo!, AOL and Sun Microsystems.

Possible problems that Facebook could meet are a successful integration of its services to mobile platforms and its ability to generate profits to shareholders.

Users of the social networking site are concerned that the requirement to generate profits and answer to shareholders will mean more advertising on the site. Facebook made just under $1 billion in profit last year.

Facebook executives are planning to offer around 420 million shares for sale which would generate an estimated $16 billion in revenue for the company, based on the $38 share price.

Investors will only be able to buy A shares, which hold just one vote per share. The current owners hold B shares which carry ten votes per share.

The existing owners will still own 96 per cent of the votes at the conclusion of the IPO, with founder Mark Zuckerberg holding just under 56 per cent of the votes for his share of around 25 per cent in the company.

Investment analysts have questioned the nuts and bolts of the company finances and believe the company may be overvalued.

One analyst said that Facebook would need to generate annual revenue of between $30 – $40 billion, an increase of ten times its current revenue, to justify the valuation.

Facebook will have to publish accounts when it goes publics which will give potential investors an opportunity to analyse its balance sheet and other financial statements.

However, advertising experts have admitted that Facebook is “the holy grail” for advertisers and its potential market is huge.

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