By Shayndi Raice, Anupreeta Das and John Letzing/WSJ
Facebook Inc. set the price range for its initial public offering at $28 to $35 a share, in a landmark deal that would raise as much as $13.6 billion for the social network and insiders.
The preliminary price range would value the company at $77 billion to $96 billion. It puts the social network on track to become the most valuable U.S. Web company at the time of an IPO, exceeding Google Inc.'s GOOG +0.62% $23 billion valuation in 2004. It would also put Facebook just behind the market capitalization of Amazon.com Inc. AMZN -0.35% and ahead of other technology giants like Hewlett-Packard Co. HPQ -3.05%
Facebook unveiled its pricing range in a new regulatory filing, which said the company would seek to sell 337.4 million shares. About half of the shares are being sold by founders, employees and investors.
People familiar with the matter had said Facebook expected to go public at a valuation of up to $100 billion.
Chief Executive Mark Zuckerberg's stake in Facebook is valued as high as about $18.7 billion. Mr. Zuckerberg will also hold or have the ability to control approximately 57.3% of the voting power of our outstanding capital stock following this offering.
The social network is now likely only about two weeks away from a final pricing and the first trading of its shares on the Nasdaq Stock Market, under the symbol FB. The company is planning to start its roadshow to pitch its stock to investors on Monday, people familiar with the matter have said.
Companies regularly tweak their pricing information after they've issued a first pricing range. That means Facebook's share price could climb higher in the coming days, depending on demand seen by the firm's investment bankers as they showcase the deal to institutional investors on a roadshow. The offering is being led by Morgan Stanley, MS -4.25% J.P. Morgan JPM -0.44% and Goldman Sachs GS -1.97% .
The planned price range is on the low side of what some investors had expected. On the private-company exchange SharesPost, Facebook shares last cleared at more than $44.
If Facebook ends up going public at the lower end of its price range, that would be a big hit for investors like Kevin Landis of San Jose, Calif., tech fund Firsthand Capital. Mr. Landis bought shares of Facebook on the secondary market for $31 to $32 a share over the last year and agreed not to sell the shares for six months after the IPO.
"I've been surprised before, but I'll be surprised again if it ends up pricing at that low end of that range," said Mr. Landis. He adds he isn't worried yet. That's in part because the low range may be a tactic to build excitement for the IPO.
Facebook's IPO is a watershed moment for Silicon Valley, which is riding a wave of a new generation of Internet IPOs. But even amid the boom, which has spawned the likes of daily-deals site Groupon Inc. GRPN -2.55% and social-gaming company Zynga Inc., ZNGA -3.41% Facebook stands out. The social network has garnered an audience of more than 900 million users since it was founded in 2004, and has been the subject of an Oscar-winning film "The Social Network."
Much like the IPO of Internet browser company Netscape in the mid 1990s, which went on to produce a coterie of other Web businesses, Facebook has also generated new start-ups built on top of its platform. Those range from Zynga to up-and-coming sites like online bulletin board Pinterest.
Facebook's reach is also unprecedented. The company, founded by Mark Zuckerberg and some Harvard University friends, is now fast approaching an audience of one billion, and it continues to draw users from numerous demographics and international markets. It's now expected to broach the sensitive—but massive—Chinese Internet market.
Still, some recent financial disclosures by the company put a damper on enthusiasm about its impending IPO. Unlike many other Web companies that recently went public, Facebook is profitable. But the company recently disclosed that its profit and sales dipped in the first quarter of this year, compared with the prior period.
Sales in the period fell 6% from the fourth quarter to $1.06 billion, while profit slumped 32% to $205 million. In 2011, Facebook posted a profit of $1 billion and $3.7 billion in sales, compared with a loss of $56,000 and $272 million in sales as recently as 2008.
Facebook has also been on something of a spending spree of late, shelling out $1 billion in a cash and stock deal for photo-sharing service Instagram and agreeing to pay $550 million for a trove of patents sold by Microsoft Corp. MSFT -0.13%
Scott Sweet, senior managing partner at IPO Boutique, said the pull of Facebook's IPO became clear when his elderly parents started asking him about it on behalf of neighbors at their Florida retirement community.
"Their friends in the community they live in weren't familiar with IPOs, and don't have a Facebook account, but are very much interested in purchasing Facebook," he said. "I've used the word pandemonium for this offering since it was filed."
With such demand in the offing, few investors think Facebook's IPO arc will follow that of Google's in 2004. University of Florida Professor Jay Ritter noted that Google initially priced its stock at its IPO at between $108 and $135 a share. That was later revised down to $85 to $95 and ultimately priced at $85. Google shares now trade for more than $600.