Financial
news reports say the world’s largest social networking site, Facebook,
will seek to raise $5 billion or more when it files the papers Wednesday
to offer stock for sale for the first time. The initial public offering
is also known as an “I-P-O.”
Each share of stock gives the stock buyer part ownership of the company,
and helps the firm raise money to expand, pay down debt, or achieve
other goals. Bonds are a different way of raising money, allowing the
company to retain full ownership of its business, but that money is a
loan that is supposed to be repaid.
The online company is expected to file the complex paperwork for its
IPO, on Wednesday. The actual stock sale is likely to come a few months
later, and some analysts estimate the company’s overall market value
could be as much as $100 billion.
If
that turns out to be correct, it would give Facebook a market value
larger than corporate giants like Boeing, about the same as McDonalds,
but much smaller than Apple computer.
So far, on-line rival Google holds the record for the largest IPO from a
U.S. Internet company. In 2004, the search engine powerhouse raised a
bit less than $2 billion.
Companies making an IPO usually enlist the aid of an investment bank to
help them properly price their stock offering and handle the logistics
of selling millions of shares of stock. News accounts say Morgan Stanley
is expected to be the lead underwriter for Facebook’s IPO. Such
agreements are generally very lucrative for the big banks and major
investors.
