Facebook to sell more stock in IPO
Screens outside Mann’s Chinese Theatre in Hollywood, Calif., advertise for people to “Become a Fan” of the theater on Facebook. (May 14, 2012) Credit: AP
Responding to extraordinary demand, Facebook said Wednesday that it would sell more stock in the company's initial public offering.
But ahead of the IPO, a debate emerged between two of the nation's largest automakers: Does it pay to advertise on the social network? General Motors, the nation's largest automaker, said it would abandon Facebook ads after concluding they were ineffective. At the same time, Ford reaffirmed its commitment to Facebook, saying their relationship was stronger than ever.
While the direct financial impact of GM's move is minimal for Facebook, the decision drew attention to the network's advertising system, which some observers regard as immature.
In a regulatory filing Wednesday, Facebook said it would add 84 million shares, worth up to $3.2 billion, to the amount sold in the IPO, which is shaping up to be the decade's hottest. The company's stock is expected to begin trading Friday on the Nasdaq Stock Market under the ticker symbol "FB."
Almost half of the additional shares come from investment firms DST Global and Tiger Global. Goldman Sachs is doubling the number of shares it is selling. Facebook board members Peter Thiel and James Breyer are also selling more shares.
Since all of the additional shares come from insiders and early investors, the company won't benefit from their sale.
"It certainly does raise the question: How much higher could the stock go if institutions who know the company well think this is a good price to sell?" said Daniel Ernst, an analyst with Hudson Square Research.
The news comes a day after Facebook raised the expected price of the stock to a range of $34 to $38 per share, up from its previous range of $28 to $35.
At the high end of the price range, the IPO would raise $16 billion. That would make it the third-largest IPO in American history, ahead of General Motors in 2010, according to Renaissance Capital.
The IPO would value Facebook at more than $100 billion. The stock is expected to get a final price tomorrow night.
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