Facebook took the first step toward public markets in the year's most highly anticipated IPO, which could rank co-founder Mark Zuckerberg among the world's richest people.
The world's largest social network, a dorm room project for Harvard dropout Mark Zuckerberg that exploded in popularity and vaulted to Silicon Valley's top tier within 8 years, is expected to make its market debut in the middle of the year. It could raise much more than the $5 billion initially targeted, and value Facebook at up to $100 billion.
The company, which some investors fear may have peaked in terms of growth, now has 845 million users. Revenue in 2011 was $3.71 billion, up 88 per cent from the previous year but at the low end of expectations. Net income rose 65 per cent to $1 billion.
The long-awaited filing on Wednesday for an initial public offering kicks off a months-long process that will culminate in Silicon Valley's biggest coming-out party since the heyday of the dotcom boom and bust.
Facebook appointed Morgan Stanley, Goldman Sachs and JPMorgan its lead underwriters. Other bookrunners included Bank of America Merrill Lynch, Barclays Capital and Allen & Co.
"We often talk about inventions like the printing press and the television," Zuckerberg said in a letter accompanying the documents. "Today, our society has reached another tipping point."
"There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future," said Zuckerberg, whose $500,000 base salary will drop to a dollar from January1 2013.
"The scale of the technology and infrastructure that must be built is unprecedented."
Zuckerberg's 533.8 million shares are worth almost $16 billion, based on a per-share value of $29.76 that the company assigned to its restricted stock units on December 31.
Facebook had previously been expected to raise $10 billion in what would have been the fourth-largest IPO in US history, after Visa Inc, General Motors, and AT&T Wireless, according to Thomson Reuters data.
The $5 billion figure in Wednesday's prospectus was an initial figure and could change based on investor demand. The prospectus underscored how 85 per cent of Facebook's 2011 revenue was derived from advertising. Last year, social-gaming company Zynga, creator of Farmville, accounted for 12 per cent of Facebook's revenue.
The company Zuckerberg started in his Harvard dorm room in 2004 that grew into a global phenomenon dwarfs any recent Internet debut, such as Zynga, LinkedIn Corp, Groupon Inc and Pandora Media Inc. Their IPOs had mixed receptions.
The last dotcom player to debut, Zynga, closed 5 percent below its IPO price during its first trading day in December.
Google raised just shy of $2 billion in 2004, while the more recent Groupon scared up $700 million and Zynga managed $1 billion.
Facebook's growing popularity among consumers and advertisers has pressured entrenched Internet companies such as Yahoo and Google. In 2011, Facebook overtook Yahoo to become the top provider of online display ads in the United States by revenue, according to industry research firm eMarketer.
"Zuckerberg is trying to send a bona fides message to techies and users," said Max Wolff, chief economic and senior analyst at GreenCrest Capital. "Very smart and under the radar."
Timeline-From Dorm Room To NASDAQ:
Here are a few highlights of its meteoric rise, several of which were chronicled in David Fincher's seminal Oscar-winning 2010 movie, "The Social Network": October 28 2003 - Mark Zuckerberg, a Harvard psychology sophomore, writes "Facemash," a website that asked users to judge students' attractiveness based on their dorm-directory photos. The authorities -- and many students -- were not amused.
February 4 2004 - Zuckerberg launches Thefacebook.com, a social network that allows users to create basic profiles including personal information and photos. February 10 2004 - Harvard students Cameron Winklevoss, Tyler Winklevoss and Divya Narenya send Zuckerberg a cease-and-desist letter, accusing Zuckerberg of independently developing thefacebook.com while he was hired to work on their social networking project, HarvardConnection.
June 2004 - Peter Thiel, PayPal co-founder and venture capitalist, invests $500,000 in Facebook.
May 26, 2005 - Accel Partners, the venture capital firm headed by investor Jim Breyer, invests $12.7 million in Facebook, valuing the company at roughly $100 million. October 24, 2007 - Microsoft Corp announces that it purchased a 1.6 per cent share of Facebook for $240 million, giving the company a total implied value of around $15 billion.
April 7, 2008 - Facebook settles with the founders of "ConnectU", the Winklevoss twins and Divya Narendra, for a purported $65 million, according to promotional material later published by ConnectU's lawyers.
May 26, 2009 - Russian investor Yuri Milner's Digital Sky Technologies invests $200 million for a 1.96 per cent stake, bringing Facebook's value down to $10 billion.
June 30, 2010 - In one of the more bizarre twists in Facebook's history, New York businessman Paul D. Ceglia files suit against Zuckerberg, claiming he had struck a deal with the founder in 2003 for half of Facebook's revenue and rightfully owned 84 per cent of the company. Three successive lawyers withdrew from his legal team within a period of four months in late 2011. The litigation remains ongoing.
October 10, 2010 - Columbia Pictures releases "The Social Network," a film about Facebook's beginning, directed by David Fincher and written by Aaron Sorkin.
January 2, 2011 - Facebook raises $500 million from Goldman Sachs and Digital Sky Technologies in a deal that valued the company at $50 billion.
January 2011 - Goldman controversially markets as much as $1.5 billion worth of Facebook shares to its private investors, but withdraws the offer from American clients on January 18 following intense media coverage and scrutiny from the US Securities and Exchange Commission. The offer was withdrawn because of accusations that it ran afoul of regulations prohibiting share-placement sponsors from aggressively promoting a deal to potential investors.
November 29, 2011 - Facebook agrees to settle Federal Trade Commission charges that it deceived users on what information it would keep private. The incident underscored how user concerns about privacy were spurring top-level government scrutiny of Silicon Valley.
January 25, 2012 - Trading of Facebook shares is halted on the secondary market as rumors of an impending IPO gain steam.
February 1, 2012 - Facebook files its Form S-1 with the Securities and Exchange Commission seeking to raise $5 billion in a highly anticipated IPO.