Facebook frenzy prompts IPO share price hike | Business| Economy and finance news from a German perspective | DW | 15.05.2012
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Facebook frenzy prompts IPO share price hike

Facebook has increased the price range at which it wants to sell its stock to the public, as investors' enthusiasm about the social network's initial public offering (IPO) is hotting up.

The price range for the company's initial stock has now been set between $34 (26.4 euros) and $38 per share, up from a previous range of $28 to $35, Facebook said in a regulatory filing Tuesday.

The announcement came three days ahead of its hotly anticipated IPO, in which the social network aims to sell 180 million new shares, as well as 157 million shares held by existing stockholders including Chief Executive Officer Mark Zuckerberg.

The share price hike was prompted by strong demand, which according to media reports was likely to force some underwriters to close their books as early as Tuesday, meaning they wouldn't be taking any more orders from potential buyers.

At the higher end of the price range, Facebook could raise $6.84 billion during the IPO, while existing shareholders would collectively make $5.98 billion.

Under a dual-class stock structure, Facebook founder and CEO Mark Zuckerberg will retain a 57-percent voting majority in the company, which is expected to be worth more than $100 billion euros after the IPO.

Big shots' deal

The vast majority of the 337 million Facebook shares on offer will go to company insiders and institutional investors, as well as to underwriting banks such as JP Morgan, Deutsche Bank and Goldman Sachs, which are handling the technical aspects of the IPO.

In addition, big US online brokerages have been taking formal requests from customers. US brokerage Fidelity Investment told AP news agency that customers should have $500,000 in their accounts and have made 36 trades in the past year to be eligible.

Anyone losing out in the IPO can buy Facebook shares on the open market after trading begins on the Nasdaq Stock Exchange in New York Friday.

Jay Ritter, Professor of Finance at University of Florida told AP news agency that Facebook is likely to "produce a gain" on the first day with "optimistic expectations of future growth" built into the share price.

"Once it starts trading, investors should think of it as just another stock that's as likely to go down as up," he warned, mentioning online seller Groupon's IPO six months ago as a good example.

"Groupon went public at an IPO price of $20, soared as high as $31.14 on the first day, just to drop to $11.7 this Monday," he said.

uhe/mll (AP, dapd, AFP)