Facebook files to go public, plans to raise $5B

A framed Facebook logo, filled with employees' signatures, hangs in the lobby of the company's Palo Alto, Calif., building in June 2009. James Martin/CNET

This post originally appeared on CNET and features reporting by Roger Cheng. Additional reporting by CBSNews.com.

Updated 6:15 p.m.

Facebook took a formal step towards joining the ranks of other public technology giants after filing for its eagerly anticipated initial public offering to potential Wall Street investors.

The company filed an S-1 form with the Securities and Exchange Commission today, officially declaring its intent to go public. Facebook plans to raise $5 billion through the IPO, according to the filing. The last major tech IPO was Google's, which raised $1.9 billion.

The S-1 pulls back the curtain on Facebook's business, providing investors with a formal glimpse into its financials. Last year, it saw revenue double to $3.7 billion, while its profit grew 65 percent to $1 billion. Over the past two years, its revenue rose nearly fivefold, while its profit more than quadrupled. The Facebook game company Zynga accounted for 12 percent of Facebook's revenue in 2011. The primary source of revenue is advertising. Co-founder and CEO Mark Zuckerberg owns 28.4 percent of the company, which could be valued at more than $28 billion if the company reaches a $100 billion valuation.

Facebook

More important are the hundreds of millions of users that regularly visit the site, exchanging messages, "liking" each other comments, and posting photos and videos. Those are customers that, for better or worse, Facebook has a lot of data on, offering advertisers a large and engaged audience for targeted advertising.

The company boasted 845 million monthly active users, more than doubling its year-earlier total.  Other key facts from the prospectus:

  • 179 million users in U.S. -- 229 million users in Europe from December 31st
  • 483 million daily active users (daily average over one month)
  • 2.7 billion likes/comments per day
  • 250 million photos uploaded per day
  • 100 billion friendships

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Facebook S-1 form
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A challenge for Facebook is growing into the high end of speculation on its valuation--$100 billion.  Speaking to Bloomberg, venture capitalist Paul Kedrosky said that deceleration is users could be an issue for the company as it has some saturation in developed markets. The natural path for growth is more engagement in the existing platform or new markets, such as Southeast Asia and South America, he said.

In addition, the company's platform has fostered a number of developers, such as Zynga, which thrive on the social network's audience and tendency to share.

Facebook's proposed valuation would instantly catapult the social network into the ranks of the largest companies, although it still lags far behind established top-tier behemoths Exxon Mobil, Apple, and Microsoft. The company's track record of revenue and profit growth--which few other private tech companies can claim--as well as the opportunities that come from its massive reach justifies the huge value in many investors' eyes.

Facebook caps off a recent run of technology companies going public, including LinkedIn, Pandora, Groupon, and Zynga all tapping general investors last year. Facebook While the success of those companies can be debated, there is no arguing the reach and access Facebook has to its users.

But Facebook has taken an unusually long road to the public market. CEO and co-founder Mark Zuckerberg has long resisted an IPO, and at one point said he would prefer to keep the company private. Rather than go public a year ago, Facebook opted for a private offering of $1.5 billion in the highly coveted company shares--a deal that valued the company at $50 billion. Further highlighting his preference to retain control of the company, Zuckerberg rejected a $1 billion takeover offer from Yahoo in 2006.

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While Zuckerberg may have been goosing demand by holding off on an IPO, the filing comes at a time when many are questioning the value of other Internet-based companies, with the stock activity of companies such as Zynga--a gaming company that was created out of Facebook's social-networking platform--failing to meet expectations.

Wall Street has long sought the IPO of the social networking juggernaut, with several firms vying to take the company public. The money raised from the offering would mean a hefty fee for underwriters Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital, JP Morgan, and Allen & Co.

On the following page, read about Facebook's risks for investors, as well as CEO Mark Zuckerberg's letter to potential investors included in the filing.

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