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Facebook announces a $5 billion initial public offering of stock

What it's worth

$100 billion

potential market value of Facebook. Analysts expect the IPO to put the company's value between $75 billion and $100 billion.

Profile

. The top executives are all under 45, with Theodore W. Ullyot, the general counsel, being the geezer at 44.

. With 85 percent of revenue from advertising, Facebook is more dependent on ad revenue than CBS.

. The 27-year-old Mark Zuckerberg made $1.5 million as the CEO in 2011 but will take only a $1 salary starting Jan. 1, 2013.Company mottos: Zuckerberg says in the filing that the company favors fast and imperfect products and lives by the mottos "Done is better than perfect" and "Move fast and break things." More Facebookisms, 5A

Who gets richer? (Facebook's biggest owners)

28.4% Mark Zuckerberg, founder

11.4% Accel Partners, venture capital firm

11.4% James Breyer, president Accel Partners

7.6% Dustin Moskovitz, founder

2.5% Peter Thiel, hedge fund manager

Status updates

$3.7 billion in revenue for 2011, up 88% from 2010. That's a little more than St. Petersburg's Raymond James ($3.2 billion), far short of Google ($38 billion).

$1 billion in net income for 2011, up 65% from 2010

3,200 employees

845 million active monthly users by December 2011.

483 million daily active users in December 2011.

SAN JOSE, Calif.

In a milestone for one of Silicon Valley's hottest companies, Facebook on Wednesday filed papers announcing a $5 billion initial public offering of stock in the world's biggest social networking business.

With the filing of its initial prospectus, stating that it intends to trade under the symbol "FB," Facebook is officially launching Silicon Valley's most widely anticipated stock offering in recent years. For the Menlo Park, Calif., company and 27-year-old co-founder Mark Zuckerberg, it represents an official transition from wildly successful startup launched in Zuckerberg's Harvard dorm room.

The papers filed Wednesday do not specify a price or how many shares are being offered. But the filing provides an initial glimpse into details of Facebook's operations and finances, which the privately held company has closely guarded until now. For example, the company disclosed that it earned $1 billion in profit on $3.7 billion in revenue last year, after sales rose 88 percent from 2010.

Facebook first turned a profit in 2009, when it earned $229 million on $777 million in sales, according to the filing. And the company is not hurting for cash. At the end of 2011, Facebook had $3.9 billion in cash and marketable securities, up from $1.8 billion at the end of 2010.

Zuckerberg, who serves as CEO, owns 28.2 percent of Facebook — a share that is significantly higher than previous reports have indicated.

Given the company's high profile and profitability, however, his compensation was relatively modest last year: It totaled $1.5 million, which includes the $692,679 it cost Facebook for Zuckerberg and his friends and family to fly on a chartered airplane. Facebook paid Zuckerberg $483,333 in salary last year and gave him a $220,500 bonus.

But the compensation of Zuckerberg's fellow executives were far less modest. Facebook paid chief operating officer Sheryl Sandberg $30.9 million last year, an amount that includes stock awards worth some $30.5 million. Chief financial officer David Ebersman received $18.7 million last year, which includes $18.3 million worth of stock awards. And engineering chief Mike Schroepfer received $24.7 million last year, including $24.4 million in restricted stock.

By some estimates, Facebook's IPO (Morgan Stanley was listed as the lead underwriter of the stock offering) is expected to create between 500 and 1,000 millionaires among Facebook employees who have been granted company stock — as much as one-third of the workforce.

Facebook has also seen its user base grow phenomenally over time, although the filing indicates that the growth has slowed markedly.

At the end of 2011, Facebook had 845 million users who accessed the site at least once a month and 483 million users who visited the site on a daily basis. That was up from 608 million monthly users and 327 million daily visitors at the end of 2010. Facebook had 360 million monthly users and 185 million daily visitors at the end of 2009.

Zuckerberg highlighted that growth in a letter to potential investors, in which he vowed, "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."

He went on: "We hope to improve how people connect to businesses and the economy. We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services."

The IPO is expected to cement Facebook's standing as one of Silicon Valley's most valuable companies — worth far more, for example, than Hewlett-Packard's market value of $55.5 billion. Google, by comparison, has a market capitalization over $188 billion, while Apple is worth more than $425 billion.

Facebook is much smaller than those companies, with just about 3,000 employees and annual revenue estimated at $4 billion. But it has been on a rapid growth curve.

The Facebook website was initially created for Ivy League college students when Zuckerberg launched it from his Harvard dorm room in 2004. A few months later, Zuckerberg moved to Palo Alto, Calif., and the rapidly growing social network was opened to the public two years later. Facebook now has more than 800 million users around the world, and is expected to pass 1 billion later this year.

With that growth, Facebook has steadily increased its share of the rapidly expanding market for online advertising — emerging as a powerful rival to older, established Internet companies like Yahoo and Google.

Advertisers in the United States alone spent $36 billion to reach online audiences in 2011, up from $26 billion in 2010, according to the research firm eMarketer. The firm estimates Facebook's share of that revenue grew from 4.6 percent in 2010 to 6.4 percent in 2011.

Not quite Top 5 ... yet

U.S. initial public offerings
($ billions)

1. Visa $19.7 (2008)

2. GM $18.1 (2010)

3. AT&T $10.6 (2000)

4. Kraft Foods $8.7 (2001)

5. UPS $5.5 (1999)

* Largest in world history – Agricultural Bank of China $22.1 billion (2010)

Tale of two companies

Facebook lists Google as a "significant competitor" in its filing. Google remains a giant by comparison, but Facebook is growing fast.

Google

$39.9 billion in 2011 revenue; a 36% growth rate from 2010

$9.74 in net income for 2011 revenue

A 15% growth rate from 2010

32,467 employees

Facebook announces a $5 billion initial public offering of stock 02/01/12 [Last modified: Thursday, February 2, 2012 1:54am]

    

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