Facebook IPO: the $16 billion friend request

A lawsuit against Facebook and a group of banks is moving forward, following a new decision from a federal judge today. Manhattan federal judge Robert Sweet says unhappy investors can pursue claims that the social network botched certain disclosures in its initial public offering last May. That suit, filed in June last year, claims Facebook "selectively" disclosed parts of its revenue outlook to only some investors and not all. Those estimates were trimmed based on expectations of increased mobile use, something the company had trouble making money on versus desktop users.

Facebook beat the street in the fourth quarter of 2012, delivering revenue of $1.59 billion and earnings of 17 cents per share.

Wall Street was expecting revenue of $1.53 billion with earnings of 15 cents a share. That compares with $1.26 billion in revenues last quarter and adjusted earnings of 12 cents per share. If you looked at social network's non-adjusted earnings, the company failed to book any profit, recording a loss of $59 million last quarter.

A group of investors who collectively claim to have lost $7.1 million have been named as the lead plantiffs in securities lawsuits that state that Facebook misrepresented its financial conditions prior to its IPO this past May. As reported by Reuters, U.S. District Judge Robert Sweet called the plaintiffs in the proposed class-action case "large, institutional investors with experience representing shareholder classes in similar litigation with the resources to pursue the action" — it sounds like the judge it taking the case seriously and that Facebook won't be let off the hook too easily, despite the risks that naturally come along with investing.

The investors named as lead plantiffs in this case, which include state pension funds in North Carolina and Arkansas, are the result of Judge Sweet's consolidation of the 42 lawsuits that emerged in the wake of Facebook's IPO. That public offering was marred by both tumbling share prices and NASDAQ technical glitches that hurt Facebook's first day on the market. As of now, Facebook is trading at $27.16, quite a bit lower than the $38.37 it closed at after its first day on the market.

The technology and financial industries were foaming at the mouth when Facebook was preparing to announce that it was going public earlier this year, an event that would represent the largest IPO ever for a web company. But even with Mark Zuckerberg at the helm, the company's performance in the stock market revealed a flurry of miscalculations and an overabundance of hype, ultimately leading to an all-time low value of $18.06 per share last Friday.

So should the company's chief executive take the blame for losing $50 billion in market value in just three months since the IPO? Or maybe it's the fault of the Wall Street banks? According to DealBook, fingers should be pointed at one particular individual whose name rarely surfaced throughout the course of the catastrophe: Facebook's chief financial officer, David Ebersman. In the analysis, Ebersman is believed to be the one that incorrectly set the offer price higher than the company originally planned, as well as mislead investors into requesting far too many shares. This opinion, however, is not a unanimous one. Dallas Mavericks' owner Mark Cuban feels that the company managed the IPO "exactly right," and pointed out that Facebook's ability to raise $10 billion in the IPO must be considered a success.

Shares of Facebook fell 9.62 percent today, to $28.84, continuing the downward slide the company has been on since it went public two weeks ago at $38 a share. The steady decline has many investors wondering where the bottom is.

If Facebook traded at the same price-to-earnings ratio as its competitors for online advertising dollars — such as Google — the social network's stock would be worth somewhere between $16-20. Right now Facebook is trading at a P/E ratio of roughly 74 to 1. Google, by comparison, is trading at 18 to 1. Price-to-earnings is a guide, not an unbreakable principle. Amazon, for example, stands apart from its peers, trading at a phenomenal 174 to 1 ratio. But Amazon also has tremendous revenue growth that investors clearly believe will translate into big earnings down the line.

Facebook's massive initial public offering, the largest of any tech company to date, has caused no shortage of problems for both it and the NASDAQ stock exchange. After opening on Friday at $38, Facebook's stock is now down to $33.73. While there are several potential reasons for the drop, delays and glitches have made the trading process murky and difficult. NASDAQ CEO Robert Greifeld has admitted that Facebook's first day of trading "was not our finest hour," saying he was embarrassed by the substantial technical issues the IPO uncovered. This morning, NASDAQ went a step further and told reporters that it would be making changes to prevent the problems from happening again.

The new IPO procedures, which were not detailed, would fix glitches that stopped investors from being able to see the status of their orders. NASDAQ will also be going through a backlog of orders that were not processed correctly, something that could give investors some extra money and could help give the stock a boost. Although Greifeld previously deemed the first day of trading "successful," Facebook's popularity provided a stress test from which the stock exchange (and underwriter Morgan Stanley, which is still reconciling orders affected by the glitch) is struggling to recover. Facebook is one of the most well-known companies to go public in recent years, but the problems at NASDAQ hurt demand from casual investors, as trades booked on Friday have still not cleared. Maybe Facebook should have hacked more than just the opening bell.

Just over eight years after Mark Zuckerberg launched thefacebook in a Harvard dorm room, Facebook has officially gone public today. And, what better time to dig back into the company's history, as documented by everyone from The Harvard Crimson and The New Yorker to Zuckerberg himself? Whether you're figuring out whether to invest or want to see how the world's most popular social network has evolved, we've put together a special IPO day edition of the best writing about Facebook — and several notes from Zuckerberg himself. It's been a rich history, with countless privacy issues, rumors of corporate buyouts, the Beacon debacle, the debut of the now inescapable "Like" button (only two years old!), radical redesigns, and years of IPO mongering.

Author Steven Johnson recently wrote, "I suspect that Facebook will forever live within this dialectic, expanding the boundaries of social sharing and then reacting to pushback from users and critics when it goes too far," and you'll see that privacy ebb and flow has been one of Facebook's many constants. Here's our roundup of the best writing on Facebook that looks at its personalities, evolution, ideas, and its effects on networked life and culture.

Facebook just ended its first day of public trading at a price of $38.37, a gain of just .97 percent after opening at $38. The closely watched debut of the company saw little fluctuation throughout the day, hovering right around that $38 mark all afternoon (with a high of $45). It has been widely reported that underwriters artificially kept the price from falling below the opening price of $38.

Zynga, another publicly traded company whose fate is intrinsically related to Facebook, saw its stock fall steeply enough that trading was halted altogether at two separate points today. Zynga ended the day at $7.16, down nearly 14 percent overall.

Shares of Facebook were supposed to start trading at 11:05 am today, but NASDAQ delayed that, and speculation is that heavy volume and too many sellers has prevented an actual start to open trading.

Several pairs of buyers and sellers were reportedly matched at $45, quickly dipping down to $42, which is about 10 percent over the strike price of $38 established in yesterday's IPO. The goal of the bankers who underwrite public offerings is to produce a healthy bump in price for their top clients to profit on while not leaving too much money on the table for the company selling shares. An opening of $42 achieves both those results.

Facebook’s $16 billion IPO values the young company at $104 billion, bigger than McDonald’s, Citigroup, and Amazon. Its debut on the stock market today caps a remarkable run for the eight-year-old social network. Begun in a Harvard dorm room, it is now one of the largest companies on the web in terms of its user base and global reach. Mark Zuckerberg has proven a ruthless leader with an eye for talent and ambition to match. But even as the company takes its turn in the Wall Street spotlight, with Zuckerberg ringing the opening bell, some of the best minds in the business are saying Facebook has reached its zenith.

"The flame may already be flickering down," quipped John Borthwick, CEO of Betaworks, when we chatted with him at Betaday, a collection of around 500 thinkers, founders, investors and entrepreneurs from the elite of New York and San Francisco’s startup communities. "Look at what happened with Instagram. Facebook was losing the battle for mobile photo sharing, one of its core features. We are living in an era where things are shifting very rapidly, from search to social, from PC to mobile and tablet. If Google had its time at the top of the mountain, Facebook’s will be even shorter. The cycles are getting ever shorter."

To commemorate the momentous day on which Facebook finally starts public trading, Mark Zuckerberg has been invited by NASDAQ to ring the stock exchange's opening bell. He won't actually be in the New York City stock market in person, instead he'll carry out the ceremonial duty remotely from Facebook's Menlo Park headquarters. That seems like a rather fitting way to perform the act for a company built upon the value of sharing and connecting over the internet.

NASDAQ trading begins at 9.30AM Eastern Time this morning, same time as every other day, which is when we'll see how Facebook's ambitiously priced IPO — a $38 per share valuation takes the total price for the company slightly above $100 billion — is greeted by professional investors. You can catch a livestream of proceedings over on NASDAQ.com from 9.28AM.

Back in November of last year, The Wall Street Journal reported that Facebook was hoping to be valued at $100 billion after its IPO, and it seems those ambitions have come true. Facebook just confirmed it has priced its initial public offering of 421,233,615 shares of stock at $38 per share. At that price, the company's market cap should be $104.12 billion in total, and the company should raise over $16 billion by selling those initial shares. They'll be on sale on NASDAQ starting tomorrow, under the "FB" symbol, and the IPO should end on May 22nd.

As late as May 3rd, it seemed that Facebook wouldn't quite make it to $100 billion, as an amended form S-1 showed that the company only valued itself in the $60-75 billion price range, but apparently would-be investors helped the company pull out the stops at the last minute.

Facebook today inched closer to a long-awaited debut on Wall Street after its stock was approved for listing on the Nasdaq exchange. Form 8-A — signed by Chief Financial Officer David A. Ebersman — was filed with the US Securities and Exchange Commission just days before the calendar hits May 18th, the date many are expecting Facebook to begin public trading. Earlier today, CNBC reported via Twitter that CEO Mark Zuckerberg will ring the stock market's opening bell on Friday, all while skipping the traditional visit to Manhattan's financial district. Zuckerberg, whose tenure at the helm of Facebook has come under renewed scrutiny thanks to the impending public offering, is expected to mark the momentous occasion remotely from company headquarters in Menlo Park, California.

The Wall Street Journal reports that Facebook will begin pitching its stock to investors starting Monday of next week, and should the social network be successful in obtaining interest, it will hold its initial public offering on May 18th. Apparently, that date isn't set in stone, as the publication's anonymous sources say Facebook might push things back a day or two either way, but it looks like the company is seeking to raise that cash sooner rather than later. Facebook originally filed for IPO on February 1st, saying that it intended to raise at least $5 billion, and make the company worth a total of $100 billion as a result, though similarly anonymous sources have suggested Facebook could raise as much as $10 billion if things go well.

Thanks to the company going public, we've learned a lot more about how the company does business that was previously behind closed doors: for instance, Facebook has 900 million active users, gets twelve percent of its business from Zynga, stores more than 100 petabytes of photos and video, and Mark Zuckerberg not only personally owns 28.4 percent of the company, but controls a majority of voting stock, too. If eager stock buyers do drive the value of Facebook above $100 billion in late May, he'll be worth about $30 billion at the end of trading.

Ahead of its IPO later this year, Facebook just released an updated Form S-1 with first quarter earnings that's now available for perusal in the SEC's filing system. Revenue is up considerably year over year — $1.06 billion versus $731 million a year ago — but net income is down a tad from $233 million to $205 million. The lower profit is attributed to just about everything in Facebook's financial sheet: operating and administrative costs, marketing, and R&D. Monthly active users of the service are now reported at a whopping 901 million, up from 680 million at the end of Q1 2011. That's year-over-year growth of over 32 percent. Of those 901 million, some 526 million are active on a daily basis.

Though Facebook's blockbuster purchase of Instagram isn't reflected in the Q1 numbers — the deal happened this month, and Q1 ended on March 31st — the S-1 reveals some interesting details of the acquisition. Notably, Zuckerberg's team paid some $300 million in cash plus "approximately" 23 million shares of Facebook. Considering the $1 billion sale price being thrown around, that would value those shares at a little over $30, and odds are pretty good we'll see that share price go well higher both before and after the IPO date.

How do billion-dollar deals get made in Silicon Valley? In the case of Facebook's acquisition of Instagram, the negotiation period was a mere weekend at Mark Zuckerberg's house, where he and Kevin Systrom, Instagram's cofounder and CEO, thrashed out a mutually agreeable valuation for the photo-sharing service. This is according to a Wall Street Journal report, which goes on to say that Zuckerberg informed Facebook's board of directors that he intended to spend $1 billion on Instagram on Sunday morning, April 8th, approximately 24 hours before the takeover became official. The board reportedly did vote on whether to approve the decision, but sources close to these proceedings describe them as "largely symbolic."

Facebook's COO, Sheryl Sandberg, is said to have been informed on Thursday of that week that Zuckerberg was going to aggressively pursue the purchase of Instagram, though she herself isn't reported to have participated in the meetings with Systrom. Amin Zoufonoun, Facebook's Director of Corporate Development — who, like Sandberg, joined the company after a previous stint at Google — was present during the negotiations, so at least some part of Zuckerberg's corporate team was there to assist him. Ultimately, however, the Facebook founder and CEO remains very much in control of the social juggernaut he started back in 2004. For more on the full timeline of Zuckerberg and Systrom's weekend talks, read the full WSJ report at the source link below.

Facebook filed its initial public offering (IPO) paperwork with the Securities and Exchange Commission (SEC) in early February, but The Wall Street Journal (WSJ) claims the company is now preparing its IPO for May. Citing a person familiar with the matter, the WSJ says Facebook halted trading of its shares on the secondary markets this week — a move that could indicate it is seeking to put a figure on its shareholder count.

In its initial IPO papers, Facebook revealed it will trade under the "FB" stock symbol and that the firm expects to raise around $5 billion. The eight-year-old organization could be valued at $100 billion after you consider the shares that existing investors already own, a hefty sum for a modern web company. Although Facebook is still in discussions with the SEC, the WSJ says it will file at least one more amendment to its S1 papers. The original documents revealed some interesting facts and figures, including that 12 percent of Facebook's 2011 revenue came from Zynga alone, and that CEO Mark Zuckerberg holds 28.4 percent of the company. We will keep our eyes open for any extra stats, but if you're looking for some Facebook shares then it looks like you'll need to save some pennies over Easter in preparation for May.

Facebook's IPO is a big deal — especially now that the $104 billion valuation is now trading. We went down to Wall Street to talk to people about Facebook and see if they would invest.

Facebook's historic IPO filing has unveiled an entire side of the company that most have never seen — the business side, something that the company's bean counters will need to get accustomed to reporting every quarter. Here's some of the most interesting (and, in many cases, staggering) data we've seen so far.

We're digging through Facebook's SEC filing for details on the company in the wake of its IPO announcement and came across this shocker: fully 12 percent of the company's revenue comes from Zynga — both ads Zynga buys and payments processed in Zynga games. Facebook makes no bones that it is a risk for the company if Zynga runs into problems:

That's a significant change from years past, where advertising revenue made up for 98 percent (in 2009) and 95 percent (in 2010). Overall, of course, Facebook's total revenue and total profits benefited from the shift, moving from $606 million in net income in 2010 to a cool billion dollars in net income for 2011.

Buried in the midst of Facebook's IPO filing today is a lengthy, impassioned letter from CEO and founder Mark Zuckerberg. The message gives some insight into how Zuckerberg views the company, and its role in the world. We present the content to you below, unedited:

As expected, Facebook just filed its initial public offering paperwork with the Securities and Exchange Commission, marking the beginning of its process to become a publicly traded company. It'll trade under the stock symbol "FB" (although it didn't specify on what exchange) and says that it seeks to raise some $5 billion in the process. When the stock hits the open market, the company will be valued somewhere around $100 billion after you take into account the shares that existing investors already own.

Mark Zuckerberg himself has been revealed to own an astounding 28.4 percent of the company, which — if the $100 billion valuation is correct — would put his net worth near $30 billion. The filing notes that Zuck controls "a majority" of voting stock, which means he wields an extraordinary amount of power inside the company (not to say there was ever any doubt of that). He's got a base salary of $500,000, peanuts for a man who ranks as one of the wealthiest on the planet; COO Sheryl Sandberg clocks in at $300,000. As you can imagine, those figures don't tell the full story once you factor in stock benefits: Sandberg had total compensation last year of $30 million, Zuckerberg (a surprisingly low) $1.5 million. As of January of next year, Zuckerberg's annual salary will drop to just $1, a common practice among wealthy chief executives with a lot of skin in the game.

It's been rumored since November, but the New York Times reports that Facebook will file for its initial public offering tomorrow. The company is reportedly looking to earn about $5 billion in new capital by selling its stock on the open market for the first time — a number just half of the $10 billion rumors that have been floating around, but things could change "significantly" as the process gets underway.

All Things D is also reporting that Facebook's board of directors has been meeting all day ahead of the IPO filing, and that the company wants to minimize the hype and bubble-effect of what promises to be the most significant public debut of any company in years. (To put it in context, even a $5 billion offering would put Facebook within striking distance of the biggest IPO in history — Infineon Technology's $5.23 billion debut in 1999.) We'll be tracking this one closely, so stay tuned.