Facebook has kicked off a cross-country roadshow to promote its $10 billion initial public offering.
Facebook CEO Mark Zuckerberg took questions on Monday at the Sheraton Hotel in Manhattan about the social network’s revenue growth and its $1 billion Instagram purchase. Facebook aims to raise about $10.6 billion, dwarfing the coming-out parties of tech companies like Google and granting it a market value of up to $96 billion - rivalling Amazon.com. Hundreds attended the event.
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, according to attendees.
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 eight-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 $77 billion to $96 billion.
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 roadshow progresses from New York to other major cities such as Chicago, Boston and San Francisco over the next two weeks.
Amid the hoopla of one of the most closely watched IPOs in years are persistent concerns about Facebook’s longer-term growth and Zuckerberg's majority control.
Zuckerberg, who will have roughly 57 per cent 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.
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 U.S. websites from YouTube to Twitter. Chief Operating Officer Sheryl Sandberg said the company would be willing to sit down with Chinese government officials and discuss partnerships there.
Susquehanna Financial Group analyst Herman Leung said in a note to investors on Monday he expected Facebook’s revenue to grow 40 per cent this year and 33 per cent 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".