By Brandon Bailey and Troy Wolverton, San Jose Mercury News –
SAN JOSE, Calif. — In a milestone for one of Silicon Valley’s hottest companies, Facebook on Wednesday filed papers announcing a $5 billion initial public offering of stock in the world’s biggest social networking business.
The stated size of the offering is smaller than expected, after weeks of speculation by analysts and industry observers who predicted Facebook might seek up to $10 billion. But documents indicated the figure is preliminary; the company could revise the numbers as it prepares to begin selling stock this spring.
With the filing of its initial prospectus, stating that it intends to trade under the symbol “FB,” Facebook is officially launching Silicon Valley’s most widely anticipated stock offering in recent years. For the Menlo Park, Calif., company and 27-year-old co-founder Mark Zuckerberg, it represents an official transition from wildly successful startup to one of the valley’s corporate giants.
Industry sources expect the stock offering will set Facebook’s overall value at $75 billion to $100 billion. The papers filed Wednesday do not specify a price or how many shares are being offered, although they indicate the company will have two classes of shares; the company is expected to release those numbers in coming weeks.
But the filing provides an initial glimpse into details of Facebook’s operations and finances, which the privately held company has closely guarded until now. For example, the company disclosed that it earned $1 billion in profit on $3.7 billion in revenue last year, after sales rose 88 percent from 2010.
Facebook first turned a profit in 2009, when it earned $229 million on $777 million in sales, according to the filing. And the company is not hurting for cash. At the end of 2011, Facebook had $3.9 billion in cash and marketable securities, up from $1.8 billion at the end of 2010.
Zuckerberg, who serves as CEO, owns 28.2 percent of Facebook — a share that is significantly higher than previous reports have indicated.
Given the company’s high profile and profitability, however, his compensation was relatively modest last year: It totaled $1.5 million, which includes the $692,679 it cost Facebook for Zuckerberg and his friends and family to fly on a chartered airplane. Facebook paid Zuckerberg $483,333 in salary last year and gave him a $220,500 bonus.
But the compensation of Zuckerberg’s fellow executives were far less modest. Facebook paid Chief Operating Officer Sheryl Sandberg $30.9 million last year, an amount that includes stock awards worth some $30.5 million. Chief Financial Officer David Ebersman received $18.7 million last year, which includes $18.3 million worth of stock awards. And engineering chief Mike Schroepfer received $24.7 million last year, including $24.4 million in restricted stock.
Facebook has also seen its user base grow phenomenally over time, although the filing indicates that the growth has slowed markedly.
At the end of 2011, Facebook had 845 million users who accessed the site at least once a month and 483 million users who visited the site on a daily basis. That was up from 608 million monthly users and 327 daily visitors at the end of 2010. Facebook had 360 million monthly users and 185 million daily visitors at the end of 2009.
Zuckerberg highlighted that growth in a letter to potential investors, in which he vowed “Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.”
He went on: “We hope to improve how people connect to businesses and the economy. We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services.”
While there have been larger IPOs in the tech industry, an initial offering of $5 billion would still outrank any other Internet-based company’s debut. Google’s initial offering in 2004, at $1.7 billion, held the previous record for the largest Internet IPO by a U.S. company.
Morgan Stanley was listed as the lead underwriter of the stock offering, after beating out Goldman Sachs for the lucrative fees that go with that position. Goldman and several other firms will also participate, however.
By some estimates, Facebook’s IPO is expected to create between 500 and 1,000 millionaires among Facebook employees who have been granted company stock — as much as one-third of the workforce.