Facebook set to raise $16 bn with largest tech IPO

May 18th, 2012 - 11:16 am ICT by IANS  

Facebook Washington, May 18 (IANS) Pricing its IPO at $38 a share, Facebook, the highly popular social networking site that has over 45 million users in India, is expected to raise $16 billion, making it the largest tech IPO in history.

It’s reported to be the third largest US IPO ever, trailing only the $19.7 billion raised by Visa in March 2008 and the $18.1 billion raised by automaker General Motors in November 2010.

The $38 IPO price is the rate at which Facebook’s underwriters (including lead banker Morgan Stanley) will sell shares to their clients, which typically include large institutional investors, mutual funds and hedge funds.

They will be on the open market beginning Friday. Many brokerages offering pieces of Facebook’s IPO allotment “closed their books” on Tuesday, meaning they stopped taking orders, CNNMoney reported.

Unlike Google, whose IPO used a “Dutch auction” to allow direct bidding by investors, Facebook’s setup doesn’t give the general public access until shares begin trading publicly on the tech-heavy Nasdaq exchange, it said.

Many Facebook employees and executives hold unexercised stock options. If all of those shares were exercised, Facebook’s outstanding share count would rise to around 2.8 billion,pushing the company’s total valuation closer to $107 billion.

Facebook CEO and founder Mark Zuckerberg himself plans to sell 30.2 million shares in the IPO offering.

Facebook said he will use the “substantial majority” of the $1.1 billion windfall from the sale to cover the massive tax bill he’ll be hit with, thanks to his plan to exercise a large stock-options grant that will increase his ownership stake in the company he founded.

After the offering, Zuckerberg will hold 503.6 million shares, or about 31 per cent of the company, worth $19.1 billion.

Venture capital firm Accel Partners, which is the largest shareholder outside of Zuckerberg, is selling 49 million shares, or about a quarter of its holdings, in the offering.

(Arun Kumar can be contacted at arun.kumar@ians.in)

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