Facebook Raises $16 Billion at IPO Price $38

May 17, 2012

Facebook Inc. set its final price at $38 a share, as the social network gets ready for its initial public offering on Friday. At $38 a share, Facebook is valued at $104 billion, the biggest-ever valuation by an American company at the time of its offering.

Facebook is set to raise $16 billion from its IPO, becoming third-largest public offering in the history of the United States, behind General Motors and Visa.

On Friday, Mark Zuckerberg, the founder, is set to ring the opening bell for the Nasdaq from Facebook’s headquarters in Menlo Park, Calif., surrounded by executives, engineers and other employees. Shares of Facebook, which will trade under the ticker FB, will start selling to the public later in the morning.

Facebook's final pricing comes amid recent financial disclosures that threw some cold water on the IPO. Last month, the company reported that its first-quarter sales fell 6% from the fourth quarter to $1.06 billion, while profit slumped 32% to $205 million over the same period.

Facebook remains one of the few firms among the recent crop of Internet start-ups making public debuts that is profitable. In 2011, Facebook posted a profit of $1 billion and $3.7 billion in sales, compared to a loss of $56,000 and $272 million in sales as recently as 2008.

At the offering price of $38, Facebook is set to trade at more than 100 times its earnings for the last 12 months. At that level, investors assume the company will be far more profitable than the rest of corporate America. The Standard & Poor’s 500-stock index trades at 14 times earnings. Facebook’s fans believe the rich valuation is warranted, given the company’s prospects for earnings. 

Facebook enjoys the highest profile of the recent generation of Web firms, with an audience of more than 900 million users globally, which by itself would make it the third-most-populous nation in the world.