* Facebook raises IPO price range to $34-$38/share
* At top of range could raise as much as $16 bln
* Adds about 84 million shares to the offering
* GM pulls advertising from Facebook, underscores revenue
* Facebook says Instagram deal to close in 2012 vs Q2 2012
(Adds detail on sellers of shares)
By Olivia Oran and Alexei Oreskovic
NEW YORK/SAN FRANCISCO, May 15 Facebook Inc
increased the size of its initial public offering by
almost 25 percent, and could raise as much as $16 billion as
strong investor demand for a share of the No.1 social network
trumps debate about its long-term potential to make money.
Facebook, founded eight years ago by Mark Zuckerberg in a
Harvard dorm room, said on Wednesday it will add about 84
million shares to its IPO, floating about 421 million shares in
an offering expected to be priced on Thursday.
The additional shares will be sold by early investors
including PayPal co-founder Peter Thiel, Accel Partners' James
Breyer and investment manager Tiger Global Management, the
company said in a filing.
The company itself has not increased the number of shares it
Zuckerberg's voting power will be reduced to about 55.8
percent from about 57.3 percent after the IPO as a result of the
issue of additional shares, the company said.
The expanded size, coupled with Facebook's recently
announced plans to raise the IPO price range, would make
Facebook the third-largest initial share sale in U.S. history
after Visa Inc and General Motors.
The social networking company is drumming up massive demand
for the offering even as slowing revenue and user growth spur
questions about the long-term Facebook story.
Those concerns over revenue growth were underscored on
Tuesday, when GM said it planned to pull out of advertising on
"This is much more a spectacle, a media event and a cultural
moment than it is an IPO," said Max Wolff, an analyst at
GreenCrest Capital. "This is not a game of models and
fundamentals at this point."
GM's announcement, while ill-timed for Facebook, should not
seriously hurt the IPO's reception for now as it may not be
representative of advertisers' overall attitude, said Brian
Wieser, an analyst with Pivotal Research Group.
"The demand for the IPO probably won't be affected
materially by this," he said, adding, however, there were
probably a lot of calls between underwriters and investors
following GM's announcement.
The IPO, Silicon Valley's largest, eclipses the roughly $2
billion debut by Google Inc in 2004.
Facebook raised the target price range to $34-$38 per share
in response to strong demand, from $28-$35, according to a
Tuesday filing. That would value the company at $93-$104
billion, rivaling the market value of Internet powerhouses such
as Amazon.com Inc, and exceeding that of
Hewlett-Packard Co and Dell Inc combined.
The increased price range made it very unlikely that
Facebook shares would double on their trading debut as they
might have if the company had come out at the low end of its
initial price range, Wolff said. He expects a first-day gain of
about 10 percent.
"No rational person thought they were buying the stock for
$28," said Wedbush Securities analyst Michael Patcher, noting
Facebook had traded as high as $44 in the secondary markets in
Facebook said in Tuesday's filing that it arrived at the
higher IPO price range after one week of marketing the offering
- part of a cross-country roadshow in which CEO Zuckerberg has
taken the stage to lay out his vision for the company's
money-making potential and its top priorities.
The price range hike, coupled with strong results from
internet and social media players Groupon Inc and
China's Renren Inc, contributed to a dotcom rally on
Wall Street on Tuesday. Shares of Pandora Media Inc rose
10.3 percent, Zynga Inc was up 7.7 percent, Groupon
climbed 3.7 percent and Renren gained 6.4 percent.
Before the IPO size was increased, Facebook would have
raised about $12.1 billion based on the midpoint price of $36
and the 337.4 million shares on offer originally.
At this midpoint, Facebook would be valued at roughly 27
times its 2011 revenue, or 99 times earnings. Google went public
at a valuation of $23 billion, or 16 times its trailing revenue
and 218 times earnings. Apple Inc went public in 1980
at a valuation of 25 times its revenue and 102 times earnings.
Facebook's IPO comes as some investors worry the company has
not yet figured out a way to make money from a growing number of
users who access the social network on mobile devices such as
smartphones. Meanwhile, revenue growth from Facebook's online
advertising business, which accounts for the bulk of its
revenue, has slowed in recent months.
With some 900 million users, it had $1 billion in net income
on revenue of $3.7 billion in 2011.
The company has also extended the time frame for its $1
billion acquisition of mobile app maker Instagram, projecting
the deal would close this year instead of the second quarter as
it previously indicated.
It provided no reasons, though a source familiar with the
matter told Reuters last week that the U.S. Federal Trade
Commission has reached out to Google and Twitter as part of the
agency's standard review for deals of that size.
Facebook is scheduled to begin trading on the Nasdaq on
Friday. A host of Wall Street banks are underwriting the
offering, with Morgan Stanley, JPMorgan and
Goldman Sachs serving as leads.
(Additional reporting by Tanya Agrawal; Editing by Edwin Chan,
Maureen Bavdek, Matthew Lewis, Richard Chang, Ryan Woo and Ian
Geoghegan and Saumyadeb Chakrabarty)