FACEBOOK IPO:: Questions and answers on blockbuster Facebook IPO – DailyFinance

By at May 18, 2012 | 12:10 am | Print

FACEBOOK IPO:: Questions and answers on blockbuster Facebook IPO – DailyFinance


NEW YORK -Taking a company public isn’t as simple as collecting Facebook friends.

Even if the company is Facebook.

When the social media company’s stock starts trading Friday under the symbol FB, buyer demand is expected to explode. At its initial offering price of $38 a share, the 8-year-old upstart is worth $104 billion. That’s more than such giants as Disney and Kraft.

The riches that will flow to the company and its early investors total nearly $16 billion.

As with any initial offering, Facebook’s IPO follows lots of negotiation — over price, paperwork, selling and buying. Here are some questions and answers about its public debut:

Q: So why is Facebook going public?

A: The same reason many other fast-growing companies do: to raise money. Selling stock to the public gives companies money to run their businesses, expand and buy other companies. Sometimes companies go public even if they have no plans for the money. Facebook says it wants to establish a public market for its shares in case it needs to raise money from investors in the future.

Q: What happens in an IPO?

A: The company sells ownership stakes to the public for the first time. Facebook plans to sell up to 421 million shares. That represents a 15 percent stake in the company. The sale is expected to raise $16 billion.

Q: Who owns shares of Facebook now?

A: Well-connected investors, employees and top insiders like company directors. They are selling 241 million shares, or more than half the total being sold. The company has said it’s selling shares at $38 each. At that price, those early owners will pocket $9 billion, or an average of $230 million each. The company will get $7 billion.

via Questions and answers on blockbuster Facebook IPO – DailyFinance.