By Lynn Cowan
Of DOW JONES NEWSWIRES
Analysts are expecting Facebook Inc. (FB) to make early trading gains during its IPO debut Friday, but it is unclear how big of a pop investors could see in the social network's stock.
Trading in the company's shares is scheduled to begin around 11 a.m. EDT on the Nasdaq Stock Market. The initial public offering priced Thursday night at $38 a share, at the high end of a raised range of $34 to $38. That range was boosted earlier this week from its original level of $28 to $35 in response to investor demand.
David Menlow, president of research firm IPOfinancial.com, says he isn't expecting a "huge pop" for Facebook. Predictions for the deal have ranged from dire--everyone trying to sell on the first day, something he feels is unlikely--to the possibility of it making a double-digit percentage trading gain.
"I think people will buy and hold for the longer term," Menlow said, adding that he would like to see the company's stock settle somewhere between $40 and $45, which he would interpret as a sign of a stable valuation.
Facebook is the 18th IPO world-wide so far this year to price above initial projections, said Dealogic, and if past performance is any indication, the stock should rise. All of the 17 previous deals around the globe that priced above range recorded first-day gains, averaging a 44.8% pop, according to Dealogic. The company's data only counts global deals in 2012 that raised more than $50 million.
A total of 421.2 million shares were sold in the company's IPO, up from its original plans for 337.4 million shares. If the company's over-allotment option is exercised by bankers, the total shares will come in at 484.4 million, generating $18.41 billion, making it the second-largest U.S. offering ever, behind record-holder Visa Inc.'s (V) $19.65 billion deal in 2008, according to Dealogic.
At that level, Facebook's offering size nudges aside former No. 2 U.S.-ranked General Motors Co. (GM), which raised $18.14 billion in 2010, according to Dealogic.
In terms of total market valuation at the time of its offering, Facebook holds the title of largest in the U.S., at $104.1 billion, ahead of United Parcel Service's (UPS) $67 billion valuation when it went public in 1999, according to Dealogic.
At that valuation, Facebook would be the 23rd largest U.S. company by market cap, ahead of Amazon.com Inc. (AMZN) and Cisco Systems Inc. (CSCO), according to Capital. It would be the 909th in terms of revenue.
Facebook, in just eight years, has become a ubiquitous online site, with more than 900 million monthly users. Demand ran high for the deal early on, thanks to Facebook's dominance in social media, its profitability and its strong brand name. The company's website is used daily by many for keeping up personal connections with far-flung family and friends, but it has also played a role in world politics, as when protestors in Egypt used the service to help coordinate demonstrations that ousted that country's leader.
Facebook generated $1.06 billion in revenue in the first quarter, up 45% from the same period a year earlier, as it delivered more ads; for all of last year, it reported revenue of $3.71 billion, up 88% from 2010 levels, as it delivered more ads and increased the average price per ad. The company makes the bulk of its money from advertising.
Net income in the first quarter declined 12% to $205 million compared with the same period of 2011; the company said one major factor in its bottom-line decline was an increase in share-based compensation expense related to restricted stock units awarded as part of compensation after Jan. 1. Net income rose 65% to $1 billion in all of 2011 compared to 2010.
-By Lynn Cowan; 202-257-2740; firstname.lastname@example.org