Facebook increases its IPO share price range

Wed, May 16, 2012, 01:00

FACEBOOK HAS increased the price range for shares in its initial public offering, pushing the company’s valuation to as much as $104 billion.

The new range of $34 to $38 a share is narrower and higher than the $28 to $35 range set by the company earlier this month, indicating an increase in investor demand despite scepticism that Facebook could grow quickly enough to justify such a high valuation.

The price increase will value Facebook at between $93 billion and $104 billion when it makes its debut on Wall Street this Friday, the expected IPO date.

The adjusted pricing could raise as much as $14.7 billion for the company, an additional $1.1 billion over the $13.6 billion indicated in its previous price range, and up from the $10bn anticipated earlier this year. This would be the largest amount yet raised by an internet company.

Investor sentiment during the last week of Facebook’s roadshow has been varied, with some investors voicing concerns about slowing growth in its advertising business and its mobile strategy.

After an investor meeting in Palo Alto, California, last Friday, one investor said he was not sure he would buy the stock. “I’m just not sure they can reach the valuation,” he said.

Steve Weinstein, managing director at ITG Investment Research, said Facebook stock may not be a good investment. “At $100 billion, a lot of things really need to go right for the company in order to generate a good return for investors over the long term,” he said. “Right now the company is not on track to do that.”

However the increased price range indicated strong demand for the stock, he added.

Facebook said the pricing change “represented management’s best estimates and discussions between us and the underwriters after approximately one week of marketing”, according to an amended S-1 filing with regulators.

The social network has also indicated that its $1 billion acquisition of Instagram, a mobile photo-sharing app, could face regulatory delays. The Financial Times last week revealed that the Federal Trade Commission had launched an investigation into the takeover and had asked Google and Twitter for information. – Copyright The Financial Times Limited 2012