Facebook priced its initial public offering at $38 per share, which is at the high end of the range it proposed on Tuesday. The price will raise about $16 billion and give the social network a valuation over $100 billion.
The company plans to list 421.2 million shares of its common stock on the Nasdaq on Friday under the symbol FB. Facebook is offering 180 million of its shares. The remainder of the shares come from existing stockholders — a number of whom decided Wednesday to sell a greater proportion of their shares. Additionally, underwriters have the option to purchase up to 63.18 million additional shares of Class A common stock to cover over-allotments, which they are expected to sell based on demand seen during Facebook’s roadshow. This would increase the total sale by about $2.4 billion.
The IPO will be largest ever for a technology company and the third largest overall in the U.S., behind Visa and General Motors.
Last month, the social network reported revenues of $1.058 billion for the first quarter of the calendar year — a 45 percent increase from the first quarter last year, but 6 percent less than the previous quarter. Facebook, which was founded in 2004, had $1 billion in net income on $3.71 billion in revenue in 2011. The company generates the majority of its revenue from advertising, with about 15 percent coming from its payments business. Facebook collects a 30 percent cut of revenues from digital and virtual goods purchased with its Credits currency.
Some investors wonder how the social network’s monetization efforts will perform on mobile devices, where it so far has shown a limited number of ads. However, since filing for an IPO in February, Facebook acquired three mobile companies, including popular photo-sharing app Instagram. On Tuesday, the company hired the team from Lightbox, a similar photo-sharing app for Android devices.
Other questions arose about the effectiveness of Facebook’s display advertising when General Motors said this week that it was re-evaluating its paid media efforts on the site after seeing little impact on sales. Other brands, including Ford, came to the defense of the social network and suggested GM might not have applied proper strategy to Facebook.
In its IPO prospectus, Facebook admits that its ad model is nascent. “We believe that most advertisers are still learning and experimenting with the best ways to leverage Facebook to create more social and valuable ads,” it says in the filing.