Facebook valued at USD104.2 billion in largest tech IPO on record

421.2 million shares at USD38 each

Facebook is valued at USD104.2 billion after raising USD16 billion in the largest tech IPO on record. Facebook offered 421.2 million shares at USD38 each, giving it the largest market cap of any company to go public in the US. The share price is above the social network’s initial pricing of between USD28 and USD35 but Sterne, Agee & Leach analyst, Arvind Bhatia, tells Bloomberg that Facebook deliberately held back in order to avoid shares dipping significantly in the days following the offering. The IPO marks a defining moment in the recent tech and digital media boom, with investors scrambling for a slice of the company despite lingering concerns regarding its continued growth and performance in mobile. Investors are now eagerly waiting to see how the social network performs in its first day of trading on the NASDAQ under the ticker ‘FB’, with many expecting its share price to rise by as much as 30%.

My feeling is they could have gone higher, but they wanted to leave some room for upside,” says Bhatia. “The demand was obviously quite strong so I think it’s the right move.”

Investor interest in Facebook’s IPO has piqued in recent months, but the valuation is sparking concern among some and reigniting the ongoing debate regarding a tech bubble. A recent poll found that 79% of traders, analysts and investors believe that valuations of USD100 billion or more are too high for the network, which generated USD1 billion profits last year from revenues of USD3.7 billion. Firms such as Groupon and Zynga completed high-profile offerings in recent months, only to see their shares and market cap drop in the followings weeks as investor enthusiasm cooled. Many believe that Facebook must hit the ground running as a public company in order to keep investors enticed so as not to suffer the same fate.

There’s an awful lot of optimism built into this valuation,” University of Florida professor, Jay Ritter, tells the Financial Times. “The company really has to perform in order to avoid the stock price declining due to these lofty expectations.”

Facebook was active in the months following its IPO filing in February, as it attempted to shore up its business against investor concerns. The social network rolled out a paid app store earlier this month and has made a series of mobile-focused acquisitions, including social discovery app Glancee and its USD1 billion purchase of Instagram in April. But analysts remain concerned over Facebook’s long-term growth prospects, particularly around the network’s revenue generation in mobile, after Facebook conceded that it is still to generate “meaningful revenue” from mobile. However, figures from Mobile Squared suggest that mobile is a huge untapped revenue generator for the social network, claiming that Facebook stands to make more than USD1.2 billion from mobile advertising in the US and its five largest European markets in the first year alone.

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