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Rumors continue to swirl around Facebook's imminent initial public offering. According to Bloomberg, the social media giant has chosen Morgan Stanley "to take the lead on its planned initial public offering, four people with knowledge of the matter said."
Facebook will file with regulators today in order to raise an initial $5 billion, though Bloomberg reports that this may increase according to unnamed sources. The $5 billion number is likely a low-ball designed to downplay expectations.
According to data compiled by Bloomberg the bank won the largest share of underwriting for US IPOs in 2011. The deal could catapult Morgan Stanley to the top of the US IPO league for the third year running.
According to Bloomberg, Facebook "has chosen FB as its stock symbol, one person said. Morgan Stanley stands to earn a larger share of the fees collected by securities firms for arranging the IPO. Goldman Sachs Group Inc., JPMorgan Chase & Co., Barclays Plc and Bank of America Corp. will help with the sale, said the people, who asked not to be identified because the matter is private."
In 2011, Morgan Stanley took 20 percent market share for IPOs for internet companies on US exchanges. Fees for the Facebook deal could top $500 million.
Steve Schaefer notes that this is a good week for the world's largest social media site to go public:
For Facebook, a filing this week would come at a docile point for the market. Volume is light and volatility has dropped with the closely-watched VIX below 20 and the major stock averages posting a strong January as the Dow climbed 3.4%, the S&P 500 4.4% and the Nasdaq 8%. The market is always at risk of a downdraft, but if such conditions persist it would set up a friendly environment for a big IPO in a few months.
While trading on secondary markets has provided liquidity for some Facebook investors, demand from institutional investors and individual shareholders is likely to be high for a company whose IPO has been hotly-anticipated for years. Even a smashing Facebook IPO is not an all-clear signal for an entire market though, just as General Motors’ $20 billion offering in November 2010 was not a reason to jump into the market with both feet.
My prediction: Facebook has a huge initial showing. The IPO is a dramatic success, exceeding all expectations. The problems come later, when it becomes difficult for the social media company to match long-term expectations with reality.
Facebook was essentially forced into an IPO and it was apparent that Zuckerberg wasn't exactly thrilled to take this route, at least so soon. I get the impression that the whole thing was rushed. Timetables had to be met, and Facebook is pushing through.
We'll finally find out how much Facebook thinks it's worth, and a lot of people who own a piece of Facebook are about to become a great deal richer. But I still can't shake the feeling that this is the beginning of a tech bubble that will make the 1990's bubble seem like chump change. The number being floated as Facebook's value as a public company - $100 billion - is staggering.
As Michael Hiltzik cautions, "It's rare that a company can live up to hype of the intensity swirling around Facebook, but not so rare for a deal to take place amid such hype. Yahoo, which was sort of a Facebook of its era, made more than 30% for its initial investors on its very first day of trading in April 1996. The stock hit a stratospheric price-to-earnings multiple of 125 in January 2000. Today its P/E is below 19 and the hype is all about whether it will survive at all."
What do you think? Can Facebook live up to its expectations - or is the hype clouding our better judgment?
