Declaring that Facebook was built to be not just a company but also to "accomplish a social mission," the idealistic young creator of the world's largest online social network launched what will be the biggest Internet IPO in Silicon Valley history Wednesday, as the Menlo Park-based company revealed the long-secret details of its business for the first time.
The projected $5 billion initial public offering was only half the size many analysts had been expecting, but represents the official start of Silicon Valley's most widely anticipated stock offering in nearly a decade. The IPO filing also marked a continental divide for Facebook, between its birth as a
wildly successful startup, and its future as one of the valley's corporate giants.
Facebook in its IPO filing revealed that it now has 845 million users, nearly half the world's Internet users. And it reported $1 billion in profit on $3.7 billion in revenue last year, making a company once derided for having no business plan one of the valley's top profit machines.
Industry sources expect the stock offering will set Facebook's overall value at $75 billion to $100 billion. The papers filed Wednesday do not specify how many shares will be sold, their offering price, or the date they will be offered; the company is expected to release more details in coming weeks.
The S-1 filing also revealed how dominant founder and CEO Mark Zuckerberg's control of the company is, with Facebook's structure of two classes of stock ownership and a highly unusual arrangement that gives Zuckerberg 57 percent of the voting power of Facebook stock.
And Zuckerberg, in a founder's letter to shareholders that echoed the anti-Wall Street ethos of Google's (GOOG)
founders' letter in 2004, declared that he plans to exercise that power to do more than maximize Facebook's profit.
"Facebook was not originally created to be a company. It was built to accomplish a social mission -- to make the world more open and connected," Zuckerberg wrote in the letter, adding, "Simply put: we don't build services to make money; we make money to build better services."
Idealist or not, the IPO will certainly make Zuckerberg one of the America's wealthiest men.
The Facebook founder owns 533,801,850 shares of stock; based on the company's last determination that those shares were valued at $29.73, his stake in the company would be worth more than $15.8 billion. He also has options to buy 120 million more shares.
Once Facebook goes public, however, his stake is likely to be worth far more. Sam Hamedeh, CEO of the New York financial analysis firm PrivCo, said people close to the deal have told him Facebook plans to sell its shares at up to $40 apiece. That number could rise amid investor demand.
Like several other tech companies, including Google, Facebook currently has a dual-class stock structure that the company intends to keep after the offering. Owners of Class B shares receive 10 votes per share, compared with just 1 vote per share for owners of Class A shares.
Zuckerberg will control a significant portion of both share classes. And he has been laying the groundwork for that extraordinary level of control for years,
with one early investor saying Wednesday that the founder long ago began requiring that investors in the company give him the power to vote their shares. While the investor said he had never before encountered such a demand -- especially from the 20-something CEO of a fledgling company -- he didn't hesitate to say yes.
