Friday Facebook IPO frenzy

Social networks, news networks and the investment community were abuzz with activity well before Nasdaq began trading today and Facebook Inc., officially opened its IPO in a bid to raise $18.4 billion.

Frenzied demand, especially from individual investors hoping to buy into an Internet juggernaut that touches hundreds of millions of people every day, is expected to drive Facebook well above its initial public offering price of $38 a share, news wire agency Reuters reported.

Chief Executive Mark Zuckerberg, 28 who started Facebook in his Harvard dorm room, could expect a net worth of nearly $20-billion.

In Canada though, the social networking sites’ local point man Jordan Banks downplayed things yesterday by saying things will be business as usual for Facebook.

“Tonight we’ll hack a bunch of projects like we always did,” Banks said, but the morning after the IPO “nothing will change one iota” for Facebook’s team and the way it does business.”

But even news of auto manufacturer General Motors dumping its $10 million Facebook advertising campaign due to poor performance, and a recent survey revealing that 44 per cent of users do not click on Facebook ads, failed to dampen today’s mood.

Even rival social network Google+ was flooded with post about Facebook’s IPO. The topic #FacebookIPO is currently the top two trending issue on the site, only topped by Steve Jobs.

Analysts were divided on how high the price might go on the first day of trade, with some expecting a relatively modest gain of 10 per cent to 20 per cent while others said anything short of a 50 per cent jump would be disappointing, according to Reuters.

“The stock could initially rise and then it could go parabolic on a wave of retail investor hope. These shares are going to trade on hope. I do not know how to value hope,” Greencrest Capital analyst Max Wolff, told Reuters.

Facebook is selling an up to 18 per cent stake in the company at a valuation of US$104-billion, comparable to the market worth of Inc, and exceeding that of Hewlett-Packard Co and Dell Inc combined.

The price tag equivalent to over 100 times historical earnings versus Apple Inc’s 14 times and Google Inc’s 19 times, makes Facebook a risky bet, according to other analysts.

 “I think they’ll make money – it will just take them a little bit longer because they’re pioneering new ways for advertisers to reach customers,” Walter Price, a portfolio manager at RCM Capital Management, told Reuters. “It’s not like there’s a simple formula. They have to try different things.”

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Jim Love, Chief Content Officer, IT World Canada

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