Contact: Brenon Daly
As IPOs go, Facebook is far more Silicon Valley than Wall Street. That was clear from the social networking giant’s roadshow this month, where 20-something CEO Mark Zuckerberg could hardly be bothered to meet with the institutional investors who do most of the buying of new offerings. (When Zuck did attend the meet and greets with the pinstripes, he wore a hoodie.) And if there was any lingering doubt about it, consider the fact that Zuck stayed at home at the company’s headquarters in Menlo Park, California rather than travel to New York City to ring the opening bell on Nasdaq.
And yet, Facebook is hardly representative of a Valley company – much less a Valley IPO. First, there’s the not-so-small matter of its $100bn market capitalization. But even beyond the valuation, the $16bn that Facebook just raised in its offering is probably more than all the tech companies that go public in the next three years or so will raise, collectively.
Our rough math: Facebook took in $16bn in today’s debut (of that amount, nearly $7bn will go to the company, with the remaining $9bn or so going to company executives and investors). In comparison, the typical tech IPO brings in, say, $100m or maybe $150m. In our surveys, investment bankers and corporate development executives have been consistently forecasting about 25 tech IPOs in each of the recent years. So assuming that rate holds – or even increases slightly – we’re still looking at roughly four years of IPOs to get to the more than 100 offerings to raise the same amount as Facebook.
Even a blockbuster IPO like Splunk had just a month ago raised just dimes compared with Facebook. Underwriters ended up selling 13.5 million shares in the enterprise data search firm at $17 each, which was roughly twice the price of the original range. That meant Splunk raised $321m in its IPO – or only about one-fiftieth the amount Facebook just raised.
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