Facebook IPO filing next week, $75-$100 Billion valuation (hang on to your hats)

It could be the biggest tech event in history. Will Facebook's IPO help us understand the value of Google+?

Facebook IPO

In Summary
  • WSJ reports that Facebook could file for IPO as early as next Wed (Feb 1, 2012).
  • Facebook is looking to raise $10 billion, with a valuation between $75 and $100 billion.
  • It could be the biggest tech event in history, if not in terms of size, most certainly in terms of the hype the 800 million member network continually attracts.
  • Facebook's valuation could provide investors with insight into the valuation of rival Google+ which by some estimates is 10% the size, but growing fast.
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Facebook IPOAre we in the midst of a social bubble, or this time are we really headed to Economy 2.0? We should find out more next week. Facebook, in a surprise move (I don’t know of anyone predicting such an early move), will likely file for IPO next week. Though the plans could change, the timing suggests a certain amount of confidence with the economy, and Facebook’s desire to take advantage of a hot window of opportunity.

Sources told WSJ that Morgan Stanley is close to inking a deal to underwrite the offering, which is expected to bring a valuation of $75 to $100 billion. At the top end, Facebook would be worth about half of competitor Google.

Class of 2011 notables

Recent tech IPOs have seen mixed results.

Social coupon service Groupon (NASDAQ:GRPN) originally surged, before falling back to earth – though it’s now just crept above its original $20 IPO price, and is up approx 3% YTD.

Streaming music service Pandora (NYSE:P) followed a similar pattern, with the initial excitement fading along with the stock. Though up 7% YTD, at $13.89 it’s struggling to climb back to its IPO price of $16. According to Forbes, “the stock has only spent a few days out of the past seven months trading at or above its first-day close.”

LinkedIn (NYSE:LNKD), the site most similar to Facebook, was also among the 2011 IPO class. But it bucked the trend, closing on its first day 109% above its $45 price. Today, at $79, the company is proving that social networks are potentially agreeable with investors.

Unparalleled event

It’s tough to find a suitable barometer for Facebook. 800 million users strong, the social network is a juggernaut, and a thorn to privacy lobbyists everywhere. If the demand is high – and I expect it will be through the roof the first week of trading – we could see explosive returns early on, before rationality kicks in. In my estimation, only Google and Netscape come close to matching the hype we’ll see when the IPO lands.

A measuring stick for Google+ Valuation?

Among several fascinating storylines to follow from this IPO is the valuation of competitor Google+. We don’t know what it’s worth to Google, though many have speculated. If Facebook’s valuation comes out at the top end, say $100B, does that mean with its 80 million users, we can fairly estimate Google+ to be worth $10B? Simple table math, yes. But it will be interesting to watch any correlation between the Facebook IPO and Google’s stock price.

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Time to text your broker…

[Photo: Flickr/oil portrait by A. Fudyma-Powers]

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