Facebook founder Mark Zuckerberg, seen here at a G8 Summit in 2008, will ring the opening bell for Nasdaq on Friday.
Investors raced to get a piece of the Facebook pie Thursday, as one of the most eagerly anticipated initial public offerings finally became available to a select few. The social networking company announced that it had set the IPO price at $38 a share. Facebook is expected to raise approximately $16 billion from its IPO, making it the largest ever in the tech industry. —TEB
There are still a few more steps before Facebook’s shares are ready to trade. The company is waiting for the Securities and Exchange Commission to declare its IPO effective—the formal green light Facebook and its underwriters need before they can sell shares to outside buyers.
The $38 IPO price is the rate at which Facebook’s underwriters (including lead banker Morgan Stanley) will sell shares to their clients, which typically include large institutional investors, mutual funds and hedge funds.
Shares will be released Thursday night to those buyers, who can resell them on the open market beginning on Friday.
Some shares were made available to individual investors, but getting them typically requires either a lot of money or a lot of trading experience. It also required moving fast. Many brokerages offering pieces of Facebook’s IPO allotment “closed their books” on Tuesday, meaning they stopped taking orders.
The frenzy for Facebook was on full display during the two-week roadshow leading up to its I.P.O. Across the country, investors packed hotel ballrooms to hear Facebook executives give their pitch. Bankers drew up waiting lists for the events, which included stops in New York, Boston and Washington.
The tour yielded an avalanche of orders. As investors lined up for shares, Facebook raised its price range and increased the size of its offering. The company is offering 421.2 million shares, 25 percent more than originally intended. Given the strong demand, the bankers, led by Morgan Stanley, JPMorgan Chase and Goldman Sachs, are widely expected to sell 63.2 million shares.
With the supersize offering, Facebook’s insiders are taking the opportunity to cash in some shares. The group, which includes early owners and more recent investors, will now collect an additional $3 billion or more from the I.P.O. Goldman Sachs, for instance, which took a stake early last year, is selling about a third of its stake. Peter Thiel, the contrarian venture capitalist who was one of Mr. Zuckerberg’s first backers seven years ago, has more doubled the number of shares that he is offloading, to 16.8 million shares.