Facebook files for IPO, plans to raise $5B

BY CECILIA KANG AND HAYLEY TSUKAYAMA | THE WASHINGTON POST

Facebook filed for a much-anticipated stock offering Wednesday that put a dollar figure on the world’s addiction to sharing, commenting and evaluating life with their online friends and family.

The company said it plans to raise $5 billion in its stock sale, making it the largest initial public offering of a Web firm in history. Based on that figure, analysts say Facebook’s value could reach between $75 billion and $100 billion. The shares are expected to begin trading in the spring under the ticker “FB.”

The government-required filing revealed details about the company that were previously unknown because the firm was private. The paperwork portrays a company that makes the vast majority of its money from selling display ads targeted to its users who have revealed to Facebook much about their lives. Those connections and activities among its 845 million members are an advertiser’s dream, experts say.

The filing stated that Facebook users upload 250 million photos a day, signal that they “like” items posted by friends about 2.7 billion times a day, and have created a web of 100 billion friends and connections on its site.

Last year, the company saw $3.7 billion in revenue and $1 billion in profits — astounding figures for an 8-year-old enterprise, though slightly less than what some analysts had expected. Google, perhaps Facebook’s primary rival, brought in just shy of $38 billion in revenue last year. It launched its own a social network, Google+, in June.

The offering will catapult Facebook chief executive Mark Zuckerberg, who co-founded the online phenomenon in his Harvard University dorm room, into the ranks of the richest Americans. The filing reveals that Zuckerberg will hold about a third of the company’s shares but nearly 57 percent of the voting power. That leaves him with control over the fate of his firm.

His role is so central that the documents listed his death as a risk factor for the entire firm. “In the event that Mr. Zuckerberg controls our company at the time of his death, control may be transferred to a person or entity that he designates as his successor,” the filing states.

The filing said Zuckerberg made a salary of $483,333 last year, in addition to a $220,500 bonus for the first half of 2011. He received “other” compensation — which covers chartered travel costs, security details and other expenses — that totaled $783,529.

Also critical to the business is Sherly Sandberg, the company’s chief operating officer, the documents say. Sandberg had a salary and bonus of $381,966 in 2011 but was also granted about $30 million in stock awards.

The firm lists other significant risk factors.

One is that the company does not display ads on smartphones and other mobile devices, making it difficult to make money on that growing marketplace.

Its privacy practices have also come under increased scrutiny in Washington. The filing warned of a slew of regulatory and legal risks, such as privacy investigations, patent disputes and potential security breaches. Regulatory action or investigations on those subjects could force the company to change its business practices or pay hefty fines.

Late last year, Facebook reached an agreement with the Federal Trade Commission to strengthen its privacy practices. The agency had been investigating alleged violations of privacy laws by the company.

“We expect to continue to be subject to such proceedings in the future,” Facebook said in the filing.

The papers also note an inquiry by the Securities and Exchange Commission, which is looking into the private sale of company securities.

The firm listed its heavy reliance on partner Zynga as a risk. The social gaming company represented 12 percent of the company’s total revenue in 2011.

Notable shareholders listed in the filing include Post Co. chairman and chief executive Donald Graham. He is a member of Facebook’s board and holds 1 million restricted shares.