Facebook doesn’t need the money. And investors say the price tag almost doesn’t matter. So how do you put a price on something that many say is priceless?
That’s the task today facing an elite few: Lead underwriter Morgan Stanley , co-underwriters JPMorgan and Goldman Sachs , select Facebook executives, and a pricing committee from the board of directors. In the span of just a few minutes around market close, they’ll finally come to a conclusion on what the world’s largest social network is worth.
Speculators have been gambling on that worth for years. Shares have traded on private markets since early 2008, and changed hands last at $43.50 a share in early April, at a valuation of $109 billion. By that measure, expectations set by Facebook’s underwriters, might appear conservative.
In its filings with the SEC, Facebook pinned the “fair value” of its shares around $30, and the first IPO range set by underwriters even went below that, from $28 to $35 per share.
According to the penultimate prospectus, Facebook will offer 421 million shares — more than half of which are sales from existing investors. The price range is $34 to $38 dollars a share, but in all likelihood Facebook could still price above those levels. The Securities & Exchange Commission only requires a re-filing once the price goes beyond 20 percent higher than the top of the range; in this case, roughly $45.
The deal doesn’t come without risks. Facebook’s IPO comes as it’s already a mature, profitable company, which means a few things: Growth may decelerate; valuations may be rich; and being an “early” investor and cashing out means you got in five to seven years ago.
That’s led some to wonder what lies ahead, but analysts are quick to the punch.
Evercore Partners expects Facebook to reach a valuation of up to $160 billion, and Wedbush Securities has a price target of $44 for the stock within the next 12 months. The bet is that Facebook, now a place where 901 million users gather to communicate and — let’s be honest — keep up with the Joneses, will need to become a place where people transact.
“The whole company is a gigantic bet, that... that there will be Facebook banking, Facebook salamis out there in the future,” said Bob Pisani during CNBC’s Facebook special.
And if there is? That’s something more than a few investors would like.
-By CNBC's Kayla Tausche
Follow Kayla Tausche on Twitter: @kaylatausche