In what many is calling the deal of the year (possibly even the century), social networking behemoth Facebook is reportedly planning to file papers with the SEC to go public as soon as Wednesday (yes, that’s tomorrow).
As first reported by The Wall Street Journal, Facebook’s planned IPO could value it anywhere from $75 to $100 billion, which would make it the biggest Internet company offering ever.
Assuming the company sells the majority of its 7-10% of available stock, that means it could raise as much as $10 billion. That amount would place it fourth all-time amongst U.S. companies.
Facebook CEO Mark Zuckerberg alone could see his net worth jump to $20 billion. With around 3,000 employees, Facebook could instantly turn many into overnight millionaires.
If the report is true, and Facebook files their papers to go public tomorrow, that would mean an IPO could happen sometime between April and June.
So, why is the company planning to go public? It could be a number of reasons, but one that stands out in particular is due to the fact that Facebook is close to having 500 shareholders. Regulatory requirements would then kick in once that mark is eclipsed, which would force the company to report all financial information to the public.
In other words, whether Facebook wants to or not, they’re going to need to eventually publicize their financial data. Pursuing an IPO at least would help the company raise some capital simultaneously.
While Facebook has not reported whether it is profitable, estimates by marketing research firm, eMarketer says that the company saw its advertising revenue jump from $738 million in 2009 to $3.8 billion in 2011. With over 800 million users to date since launching in 2004, Facebook is quickly cementing its position as the leader in the next generation of display advertising.
Should you buy Facebook stock?
Rumors aside, should you consider purchasing Facebook stock?
CNBC’s Mad Money host Jim Cramer had this to say about a potential Facebook IPO:
With 800 million users, a fantastic business model and tons of revenue, Facebook deserves to have a gigantic valuation. It’s growing really fast and making a ton of money. So don’t be thrown off the scent of what could be a real homerun.
Forbes also posted an article yesterday assessing the prospects of investing in Facebook stock. In the article, author Nigam Arora estimates that 250 million shares could be sold, priced at $35-40. He also adds later that he predicts that demand will easily trump supply, at around 4 to 1.
What we’re looking at right now is a lot of people salivating at the opportunity to make a boatload of cash. And I’m not talking just about Facebook employees. For instance, investment banking firm, Morgan Stanley, could also come away with millions if rumors that Facebook is planning to choose the firm to lead the blockbuster deal are confirmed true.
Call it the next great Internet bubble all you want. Facebook has close to 1 billion users, and isn’t going away anytime soon.
Would you purchase stock in Facebook? Let me know in the comments section below and also vote in the poll in the sidebar!
Update: It happened! Facebook filed their IPO this afternoon with the SEC. Here’s the official papers.