Facebook Inc. priced its initial public offering at the top of its target range to raise more than $18 billion, as strong demand, particularly from retail investors, fuels anticipation of a big pop in the stock when it begins trading today on the Nasdaq.
Predictions of how much the stock will rise on its first day of trade vary greatly — some experts said the high IPO price and increased float could limit gains to 10 percent to 20 percent, while others said anything short of a 50 percent jump would be disappointing given the hype.
“I think anything over 50 percent will be considered a successful offering — anything under that would be underwhelming,” said Jim Krapfel, analyst at Morningstar. “A lot of retail investors are not concerned about valuation. That’s what is going to drive the first-day pop.”
Facebook, based in Menlo Park, is selling a 15 percent stake priced at $38 a share, giving the world’s largest online social network a valuation of $104 billion.
That puts the 8-year-old company, founded in a Harvard dorm room by Chief Executive Officer Mark Zuckerberg, a valuation akin to that of Amazon.com. and exceeding that of Hewlett-Packard Co. and Dell Inc. combined.
Investor enthusiasm for Facebook shares comes despite questions about the company’s long-term money-making capabilities, particularly after it reported a quarter-to-quarter revenue slide in April.
“Hundreds of millions of people are extremely passionate about this product. A lot of those people want to be a part of this event, of this company that they have an affinity for. That’s creating a level of excitement for the stock that you don’t normally see,” said Steve Weinstein, an analyst with ITG Research.