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Valuation of Facebook IPO? - Aimee - 10-15-2012 09:11 PM
I'm confused about the upcoming Facebook IPO. Articles are saying that it's a $10 billion IPO with a valuation of $75-$100 billion. If the IPO is only for $10 billion, then why is the valuation 10 times that? Are the new shares expected to appreciate tenfold as soon as they hit the market? Also, I read that Zuckerberg is projected to earn $25 billion from the transaction due to the fact that he currently owns close to 25% of the company. However, if he's selling his 25% stake in a $10 billion IPO, then shouldn't he only be making $2.5 billion? I realize that the $25 billion is based on the projected valuation of $100 billion, but this doesn't even make sense to me because I thought the profit would be based on the amount of capital raised (i.e., $10 billion). I'm sure I'm missing something here. Can anyone explain how this works? Thanks in advance for your help!
- Peter - 10-15-2012 09:19 PM
Your not missing something.
I can't figure this out myself. I have concluded that we will not know the final figure until right at issue time.
There is so much public speculation over this, including this is the biggest IPO in recent times.
Who knows how this is finally worked out, and what processes they used.