Facebook's IPO road show kicks off in NY

2012-05-08 16:37
New York – Mark Zuckerberg addressed Facebook’s slowing revenue and its $1bn Instagram purchase at the start of a road show on Monday aimed to promote its $10bn initial public offering. 

Wearing his trademark "hoodie" sweatshirt, jeans and sneakers, Zuckerberg fended off one investor who questioned the deal to buy photo-sharing developer Instagram, an acquisition analysts and media said may have been concluded too hastily.

The 27-year-old - whose majority control of Facebook worries some investors about accountability - replied he would do the Instagram deal again if he had to, said attendees.

Hundreds of investors packed the Sheraton Hotel in Manhattan and formed a snaking line around the block outside, watched by police and clipboard-carrying staffers, a stark contrast to the more mundane nature of the average investor IPO presentation.

Facebook aims to raise about $10.6 billion, dwarfing the coming-out parties of tech companies like Google Inc and granting it a market value of up to $96bn - rivaling Amazon.com.

Security

Facebook's emergence as a cultural phenomenon, whose beginnings were depicted in the fictionalised 2010 film "The Social Network", added a palpable energy and buzz to the event.

Attendees were asked for multiple forms of identification and cross-checked against a list of names.
Curious passers-by asked questions to media and investors waiting to spot arriving Facebook executives.

One investor joked that it should have been held in New York's Madison Square Garden, a standard venue for rock concerts.

"This is unlike anything we've ever seen," said another investor who was at the event.

IPO


Observers pointed to Monday's outsized event as a sign that interest was high in one of the biggest retail-technology names to hit stock markets in years.

The 8-year-old social network that began as Zuckerberg's Harvard dorm room project indicated an IPO range of $28 to $35 a share on Thursday, which would value the company at $77bn to $96bn.

The size of the IPO reflects the company's growth and bullish expectations about its money-making potential as a hub for everything from advertising to commerce. Many investors say they expect Facebook to raise its offer price range as the road show progresses from New York to other major cities in the United States over the next two weeks.

Zuckerberg, who will have roughly 57% voting control after the IPO, personally forged the expensive deal to acquire mobile app maker Instagram in a matter of days last month with little involvement from Facebook's board of directors, according to media reports.

Asked about the deal by an attendee at the event, Zuckerberg said Facebook's management had discussed a possible Instagram acquisition at length in several meetings. Facebook decided to act when it saw Instagram's user data cross a "tipping point" from which they believed it would grow significantly, he said.

He said Facebook moved quickly to strike a deal when it became clear that Instagram was open to being acquired.

Expanding

Zuckerberg was accompanied by finance chief David Ebersman, and Chief Operating Officer Sheryl Sandberg.

Investors managed to ask just five questions during the event, including a query about Facebook's potential plans to enter China, the world's largest Internet market by users.

Zuckerberg noted that Facebook was blocked in China - as are popular US websites from YouTube to Twitter. Sandberg said the company would be willing to sit down with Chinese government officials and discuss partnerships there.

With 900 million users, Facebook is challenging established Web businesses such as Google and Yahoo for consumers' online time and advertising dollars.

Longer term, analysts say Facebook needs to develop a way to earn money from the increasing number of users who access the social network on mobile devices such as smartphones.

Facebook, which makes most of its money from advertising, began offering limited ads on the mobile version of its service only recently.

The average time spent accessing Facebook via smartphone in the US was 441 minutes per unique visitor in March, compared with 391 minutes via computer, according to a report released by IT research house comScore on Monday. That exceeds the 146 minutes for users of mobile check-in service Foursquare, and about 114 minutes for microblogging service Twitter.

Revenue

Susquehanna Financial Group analyst Herman Leung said in a note to investors on Monday he expected Facebook's revenue to grow 40% this year and 33% in 2013.

He said the $28 to $35 range for Facebook shares was an "attractive" valuation that provided a "compelling entry point" for investors.

In a separate note published Sunday, Pivotal Research Group analyst Brian Wieser put a $30 price target on Facebook shares.

"Our conversations with investors to date suggest that concerns around revenue growth and the absence of mobile monetization will linger for some time," Wieser said.

But, he added, "we would not be surprised if the stock trades up above the IPO price on retail interest in the company over the near term."  

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