Home / Technology/ Facebook, and Zuckerberg, embark on mega-IPO

Facebook, and Zuckerberg, embark on mega-IPO


Comments / {{hitsCtrl.values.hits}} Views / Friday, 3 February 2012 00:01


Reuters: Facebook unveiled what is expected to be Silicon Valley’s largest ever initial public offering, but made it clear to outside investors that they will have little voice in its running, as founder and CEO Mark Zuckerberg will continue to exercise almost complete control.

The Harvard dropout, who launched what would become the social networking phenomenon out of his dorm room, will own 56.9 per cent of the voting shares of a company that is expected to be worth up to $100 billion when it goes public. He will have economic control of about 28 per cent of the shares, ranking him among the richest people in the world.



The 27-year-old’s ownership position means that Facebook, which is aiming to raise at least $5 billion and as much as $10 billion, will not need to appoint a majority of independent directors or set up board committees to oversee compensation and other matters.

The company’s ownership structure and bylaws go against shareholder-friendly corporate governance practices put in place in the United States after years of investor activism.

As Facebook states in its IPO prospectus, Zuckerberg will “effectively control all matters submitted to its stockholders for vote, as well as the overall management and direction of our company.”

The IPO prospectus shows that Facebook, which says it has 845 million monthly active users, generated $3.71 billion in revenue and made $1 billion in net profit last year, up 65 per cent from the $606 million it made in 2010.

Facebook, which exploded in popularity and vaulted to Silicon Valley’s top tier within eight years, is expected to make its market debut in the middle of the year.

Wednesday’s long-awaited filing for an initial public offering kicks off a months-long process that will culminate in Silicon Valley’s biggest coming-out party since the heyday of the dotcom boom and bust.

Facebook appointed Morgan Stanley, Goldman Sachs and JPMorgan its lead underwriters. Other bookrunners included Bank of America Merrill Lynch, Barclays Capital and Allen & Co.

“We often talk about inventions like the printing press and the television,” Zuckerberg said in a letter accompanying the documents. “Today, our society has reached another tipping point.”

“There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future,” said Zuckerberg, whose $500,000 base salary will drop to a dollar from January1 2013. “The scale of the technology and infrastructure that must be built is unprecedented.” Zuckerberg’s 533.8 million shares are worth almost $16 billion, based on a per-share value of $29.76 that the company assigned to its restricted stock units on December 31. As a result, Zuckerberg, following the example set by Apple founder Steve Jobs, agreed to decrease his compensation from $1.48 million last year to $1.00 effective January 1, 2013.

By comparison, Sheryl Sandberg, Facebook’s Chief Operating Officer and Zuckerberg’s top lieutenant, earned $30.8 million in total compensation last year.

Facebook had previously been expected to raise $10 billion in what would have been the fourth-largest IPO in US history, after Visa Inc, General Motors, and AT&T Wireless, according to Thomson Reuters data.

The $5 billion figure in Wednesday’s prospectus was an initial figure and could change based on investor demand.

The prospectus underscored how 85 per cent of Facebook’s 2011 revenue was derived from advertising. Last year, social-gaming company Zynga, creator of Farmville, accounted for 12 per cent of Facebook’s revenue.

Facebook’s IPO will dwarf any recent Internet debut, such as Zynga, LinkedIn Corp, Groupon Inc and Pandora Media Inc. Their IPOs had mixed receptions.

The last dotcom player to debut, Zynga, closed 5 per cent below its IPO price during its first trading day in December.

Google raised just shy of $2 billion in 2004, while the more recent Groupon scared up $700 million and Zynga managed $1 billion.

Facebook’s growing popularity among consumers and advertisers has pressured entrenched Internet companies such as Yahoo and Google. In 2011, Facebook overtook Yahoo to become the top provider of online display ads in the United States by revenue, according to industry research firm eMarketer.


Share This Article


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

Of love and struggle: The interconnected feminist movements of South Asia

Wednesday, 26 September 2018

The last Cat’s Eye column observed all that there is to celebrate in the recent Supreme Court of India’s judgement on Sec. 377, which decriminalised adult consensual same-sex sexual activity in private. We used this ‘magnificent’ decision, wh


Accessibility at buildings and places – Indispensable need to enjoy civil rights

Wednesday, 26 September 2018

Have you not yet realised that the chances are now very high that at any stage or any moment in life, for a short time or for a long time, for different reasons, you or your loved ones could experience physical and/or sensory impediments, and fall in


Over-tourism: The new buzz word in tourism

Wednesday, 26 September 2018

Periodically the tourism industry is in the habit of coming up with some interesting name to describe a new emerging trend or situation in the industry. Sometimes the phenomena is not new, but has become relevant and topical enough to ‘package’ a


Depreciation of the rupee and Sri Lanka’s dilemma

Wednesday, 26 September 2018

The rupee depreciated by Rs. 29 from 2005 to 2014 and the average year-on-year depreciation of the Sri Lankan rupee was 2.8% per year. Official foreign reserves increased from $ 2.7 billion to $ 8.2 billion over the same period. In stark contrast, th


Columnists More