Facebook Ready for IPO

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TECHNOLOGY JANUARY 28, 2012

Facebook is close to picking Morgan Stanley as the lead underwriter for its initial public offering, a significant steptoward what is likely to be one o f the biggest-ever U.S. public debuts. Don Clark has details on The News Hub. Photo:Reuters

By SHAYNDI RAICE and RANDALL SMITH

Facebook Inc. could file papers for its initial public offering as early as this coming week, people familiar with the

matter said, as anticipation mounts for what is likely to be one of the biggest debuts for a U.S. company.

The deal, seen as defining moment for the latest Web investing boom, could raise as much as $10 billion and

value the social network between $75 billion and $100 billion, said people familiar with the matter. A valuation of

$75 billion would be below earlier expectations.

The website, which in less than eight years has attracted more than 800 million members, has changed the way

people across the globe communicate, from organizing political protests to sharing baby pictures.

The Internet giant is close to picking Morgan Stanleyto lead the deal, these people said. Wall Street banks, many

of them struggling amid a crimp in trading profits, have been jostling for a leading role in the deal, which could

yield them tens of millions of dollars in banker fees, potential new business and bragging rights.

A nod for Morgan Stanley would mark a disappointment for rival Goldman Sachs Group Inc., which a year ago

was viewed as having an edge to lead the deal. One person familiar with the matter said that while Morgan

Stanley would likely land the coveted "lead-left" spot on an IPO financial filing, Goldman would also likely play a

significant role.

Spokespeople for Facebook, Morgan Stanley and Goldman Sachs declined to comment.

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Facebook Readies IPO FilingMorgan Stanley Seen Leading Deal Valuing Giant at $75 Billion to $100 Billion

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Facebook could file IPO paperwork as early as Wednesday of next week, and Morgan Stanley is close to winning the"lead left" position in the IPO. Facebook has been valued between $75 and $100 Billion dollars.

Journal Community

Kimihiro Hoshino/Agence France-Presse/Getty Images

Facebook CEO Mark Zuckerberg delivered a keynoteduring the Facebook f8 Developer Conference inSeptember.

Facebook's Rise

See a timeline of key events in Facebook'shistory.

Facebook in Photos

Who's Who at Facebook

Read about the company's top executives.

Facebook could file documents with the Securities and Exchange Commission as early as this coming Wednesday,

said one person familiar with the matter. But that timing is just one scenario Facebook executives are

considering, the person said. Executives are also considering filing a few weeks later, the person said.

People familiar

with the matter

have said the

company is

targeting an IPO

sometime

between April

and June.

A $10 billion

Facebook

offering would

rank fourth

among IPOs for

U.S. companies,

behindVisa

Inc., General

Motors Co. and

AT&T Wireless,

according to

Dealogic. It

would rank

Facebook as the

biggest U.S.

Internet

offering ever,

replacing

Google Inc.,

which raised

$1.9 billion in

2004 at a $23

billion

valuation.




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What Is Facebook Worth?

At a $100 billion valuation, Facebook would be worth about the

same as McDonald's Corp. and nearly half of Google.

Facebook's revenue is driven by its advertising business, as big

brands rush to the site to interact with consumers through

display ads and fan pages. Facebook has been able to increase its

world-wide advertising revenue from $738 million in 2009 to

$3.8 billion in 2011, according to estimates from research firm

eMarketer. It isn't known if Facebook is profitable.

Facebook's final valuation will be determined by a variety of

factors, people familiar with the matter said, such as investor

demand for social media, the IPO market and the health of the

European economy.

The IPO will mint a new generation of Silicon Valley millionaires

on the level not seen since Google's offering. Some 3,000 people

work at Facebook.

An IPO will also test the ability of Chief Executive Mark

Zuckerberg, age 27, to manage a global company whose financial

performance will be scrutinized every three months by investors.

Mr. Zuckerberg started the company in 2004 out of his Harvard

University dorm room. Overall, about 500 million users now log

into the site daily, according to Facebook.

Mr. Zuckerberg had been reluctant to push forward with an IPO.

People familiar with his thinking said he has been fearful of the

damage an IPO could do to the company's culture. He wants

employees focused on making great products, not the stock

price, they said.

But outside forces are partly pushing his hand. Facebook

executives began to realize in 2010 that Facebook would havemore than 500 shareholders by the end of 2011, which would

trigger a regulatory requirement that Facebook start publicly

reporting financial information.

Mr. Zuckerberg decided it made more sense for Facebook to go

public and reap some financial benefit from an IPO, rather than stay

private but have to release its financial information, said people

familiar with his thinking.

Leading the Facebook sale would be a huge win for Morgan Stanley,

which last year cemented its position as the top Internet stock

underwriter by leading the IPOs ofLinkedIn Corp., Groupon Inc., and

Zynga Inc. The bank's global tech banking team, led by Michael Grimes

and Paul Chamberlain, is also based in Menlo Park.

Facebook would cap a recent wave of Web IPOs, some of which have

struggled amid growing investor scrutiny of the new Internet

companies. But investors and analysts said now could be a good time

for a Facebook offering.

This year, the overall market has risen, and on Friday other Internet

stocks rallied on news that Facebook would soon file for a deal. "The




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excitement around Facebook is still enormous," said Max Wolff, an

analyst at GreenCrest Capital, which researches companies going

public.

The recent IPO climate "hasn't been particularly strong," said Peter

Falvey, co-head of the technology banking group at Morgan Keegan &

Co. But Mr. Falvey added that with "the recent stock market strength

and maybe some green shoots in the economy, there could be a

fortuitous window for Facebook."

Write to Shayndi Raice at [email protected] and Randall Smith

at [email protected]


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