Facebook Files For $5 Billion IPO

By: Julianne Pepitone

NEW YORK (CNNMoney) — At long last, the Holy Grail of Internet IPOs is here. Facebook filed Wednesday to raise $5 billion in an initial public offering.
In 2011, Facebook earned $1 billion on sales of $3.7 billion. As of December 31, Facebook had 845 million daily active users.
The company crossed the line into profitability in 2009, five years after it launched in founder Mark Zuckerberg’s Harvard dorm room. Facebook earned $229 million that year on sales of $777 million, and has remained profitable ever since.
The vast majority of Facebook’s revenue comes from advertising: a combination of search and display ads.
Facebook’s other revenue stream is its payment system for purchases within apps and games: Facebook Credits. Facebook keeps 30% of the revenue from those payments, and passes the remaining 70% on to the app developer.
That model has paid off: Revenue from Zynga, which makes FarmVille and other games played on Facebook, represented 12% of Facebook’s total revenue in 2011.
Another choice tidbit: In 2011, Facebook CEO Zuckerberg raked in a $500,000 base salary. But he requested — and will receive — only $1 per year in salary starting January 1, 2013.
It’s not yet known on which stock exchange Facebook will trade, through it said it plans to use the ticker symbol “FB.”
Facebook will likely re-file its paperwork several times over the coming months. Those updates will add more details and could even restate some of the financial information detailed in Wednesday’s filing.
How much Facebook is worth: In this initial paperwork, companies don’t declare how many shares they’re going to sell, or how much those shares will cost. Those details will be added in an updated filing shortly before trading begins.
Without that share price information, Facebook’s valuation is still speculative.
Facebook has its own guesses, though. The company said it conducted its own valuation of its stock at the end of each quarter, and as of December 31 determined it to be worth $29.73 a share.
Trading won’t begin for several months, as Facebook now has to field questions from regulators and court investors for its stock sale.
Most analysts estimate Facebook’s valuation will fall somewhere between $85 billion to $100 billion. But the value of Web companies can be extremely volatile.
A recent example: Zynga. The FarmVille maker’s IPO filing reported that it valued its shares in August 2011 at $17.20 each, which gave the company a valuation of $14 billion. But when Zynga went public in December, shares sold for just $10 — valuing the company at $7 billion.
Several other Internet companies made their public debuts in 2011, but the end of the year proved to be a turbulent time for the sector. Shares of Groupon, Pandora, Zillow, LinkedIn and Angie’s List all suffered steep double-digit losses for November, though most clawed back at least a bit in December or January.
Copyright CNN 2012

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