8 Stocks Set to Soar off Facebook's IPO
The biggest news of late on this hot IPO is that Facebook plans to increase the size of its initial public offering by almost 25% to 420 million shares, so it could raise as much as $16 to $20 billion due to strong demand for the stock. In addition, on Monday news broke that the initial pricing from the underwriters has risen sharply, from $28-$34 to $34-$38. That would make Facebook the fifth-largest U.S. IPO ever, according to IPO research and investment firm Renaissance Capital.
As a trader, I don't love that Facebook is increasing the float right before its IPO debut. The lower the float, the higher the chance this stock can pop huge if demand is truly as high as some are anticipating. Remember when LinkedIn(LNKD) came public? LinkedIn didn't bring anywhere near 420 million shares to the market for its IPO, and the stock more than doubled on its trading debut. To put things into perspective, LinkedIn's float right now is just 60 million shares.
I also don't love that the new shares Facebook is issuing are coming from Goldman Sachs, which is now selling as much as 50% of its stake, up from 23%. The Wall Street Journal released a list of some of the smart money that's selling its stakes in Facebook. Others that jumped out at me were Tiger Global, which will now sell 50% of its stake, up from a planned sale of 7%, and Peter Thiel, who plans to sell as much as 50% of his stake.
If this deal prices at the high end of the range, the company could start trading with a market cap of $100 billion. To put things into perspective, Google(GOOG) had an IPO valuation of $25 billion, and it current has a market cap of $205 billion. Despite this high valuation, Facebook has enough buzz and excitement around it that the stock is probably going to make a monster move higher on its IPO debut. It would not surprise me to see the stock tag $55 to $65 a share once it hits the market. I would have probably predicted an even higher IPO price had Facebook not increased the offering.