How valuable is Facebook?

Social networking site's IPO may be announced this week; its worth could match McDonald's

SAN FRANCISCO - When Facebook makes its long-expected debut as a public company this spring, the social-networking giant will likely vault into the ranks of the largest public companies in the world, alongside McDonald's, Amazon.com and Bank of America.

The Wall Street Journal (WSJ) reports that Facebook is preparing to file initial paperwork for an offering that could raise as much as US$10 billion (S$12.5 billion) and value the company at between US$75 billion and US$100 billion.

The filing with the United States Securities and Exchange Commission could come as early as tomorrow, with an initial public offering (IPO) in three or four months.

The targeted amount would slot it among the world's 25 largest IPOs.

The IPOs of 14 companies would rank higher than Facebook's, according to investment adviser Renaissance Capital. Among them were Visa's US$17.9 billion IPO in March 2008, the largest for a US company, and world-topper Agricultural Bank of China, which raised US$19.3 billion in July 2010, not including extra shares issued to meet demand.

A Facebook spokesman said the company would not comment on IPO-related speculation. The WSJ had cited unnamed sources, who said that Facebook was close to picking Morgan Stanley as the lead underwriter.

The buzz surrounding an outsized haul for Facebook's founders, employees and early investors remains a hopeful sign for capital markets after a deep recession. At the reported price, Facebook's IPO would be the biggest for an Internet company in the US - topping the debut of one of its main rivals, Google.

"We are expecting 2012 to be a year of recovery for the IPO market, led by the Facebook IPO," said Ms Kathy Smith, Renaissance Capital's principal.

The event will follow a string of tepid debuts by technology start-ups, including social game maker Zynga and discount advertiser Groupon.

Facebook's will be the most anticipated tech IPO since Google went public in August 2004. Not including shares sold by early investors, the Internet search giant raised US$1.2 billion and grabbed a market value of US$23 billion, the biggest so far for a US Internet company.

The IPO raised US$1.9 billion, including shares sold by early investors and extra stock issued to meet the heavy demand. It is not known whether Facebook's US$10 billion target includes shares owned by early investors.

Facebook's reported valuation of US$75 billion to US$100 billion compares with about US$100 billion for McDonald's, US$90 billion for Citigroup and Amazon.com and US$75 billion for Bank of America. It would exceed the market cap of US$55 billion for Hewlett-Packard, one of the world's largest technology companies by revenue.

Both Facebook and Google earn most of their money from advertising and are now competing to gain as much information as possible about their users to help advertisers target niche audiences.

According to eMarketer, Facebook is expected to increase its share of the US display ad market to about 20 per cent this year from 16 per cent last year, above second-ranked Yahoo!'s expected share of about 13 per cent. AP