Facebook increases IPO price range to $34-38 a share

Facebook Inc raised the price range in its initial public offering, increasing the amount it is seeking in the record sale for an internet company to as much as $12.8 billion.

The new range of $34 to $38 a share, announced in a regulatory filing on Tuesday, is up from a previous range of $28 to $35. Facebook is seeking a valuation as high as $104.2 billion, based on the upper end of the new range.

Chief Executive Officer Mark Zuckerberg, in a roadshow to pitch the IPO to investors, may be winning over skeptics who initially balked at buying the shares, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Raising the range would be the best signal of what the underwriters are hearing from their institutional buyers who have seen the roadshow,” Gordon said. “Despite the doubts, the buyers like what they’re hearing.”

At the upper end of the new range, Facebook would be valued at 26 times trailing 12-month sales, more than double Google Inc’s valuation when the search-engine operator went public in 2004.

The company was already in a position to surpass United Parcel Service Inc as the most valuable company in history to go public in the US, based on market capitalisation, data compiled by Bloomberg and Dealogic show.

Facebook plans to stop taking orders on Tuesday for its initial public offering, two days ahead of schedule, a person with knowledge of the transaction said yesterday. The offering of 337.4 million shares is oversubscribed, according to people with knowledge of the matter, who declined to say by how much orders exceeded the amount of stock being offered.

Facebook’s underwriters will have the option to buy an additional 50.6 million shares from the company and its holders after the IPO, filings show.

Some institutional investors had balked at buying into Menlo Park, California-based Facebook over concern about the site’s growth prospects, people with knowledge of the matter said last week. In a Bloomberg Global Poll of more than 1,250 investors, analysts and traders, 79 per cent said Facebook doesn’t deserve such a high valuation.

“Facebook’s pricing seems to be quite expensive,” said Yves Maillot, head of investments at Robeco Gestions SA in Paris, who helps oversee $6.8 billion. The IPO is also pressing ahead in a “very difficult environment for the US equity market.”

The Standard & Poor’s 500 Index sank 1.1 per cent to 1,338.35 yesterday, the lowest level since February, as Greece struggled to form a new government amid mounting concern the nation may leave the euro. The index fell for a second day as financial companies and energy producers led losses among all 10 of its main industry groups.

Facebook initially planned to finish taking orders on May 17, data compiled by Bloomberg show. Its shares will list on the Nasdaq Stock Market under the symbol FB. Underwriters for the sale include Morgan Stanley, JPMorgan Chase & Co and Goldman Sachs Group Inc.