Facebook shares rise 11%

REUTERS

Members of the media deliver their reports in front of the NASDAQ Marketsite at the start of the listing for Facebook in New York, May 18, 2012. Facebook Inc. began trading on the Nasdaq with it's initial public offering at $38 per share, valuing the world's largest social network at more than $100 billion.

Facebook Inc shares opened 11 percent higher on Friday, after the pioneering online social network raised as much as $18.4 billion in one of the biggest initial public offerings in US history.

After a delay in the opening print that drove up anxiety levels among traders and onlookers outside the Nasdaq, the company's closely watched stock began trading at $42.05, compared with an IPO price of $38.

To rapturous applause from employees, Facebook Chief Executive Mark Zuckerberg - flanked by Chief Operating Officer Sheryl Sandberg and Nasdaq Chief Executive Robert Greifeld - rang the bell to kick off trading at the company's Silicon Valley headquarters at 6:30 a.m. Pacific time.

The 28-year-old billionaire founder hugged and high-fived Sandberg and other employees in celebration after he pressed the remote button.

The area outside Facebook's offices at 1 Hacker Way was packed with throngs of photographers, more than 12 television trucks, and a TV news helicopter hovering overhead as the excitement reached fever pitch.

With a value of $104 billion, Facebook became the first American company to debut at over a $100 billion. It is larger than Starbucks Corp and Hewlett-Packard combined.

“A 15 to 20 percent pop is in the realm of possibility,” said Tim Loughran, a finance professor at the University of Notre Dame, before the start of trade.

“Given they already moved their IPO range up and increased the size, that's bullish to begin with.”

Facebook priced its offering at $38 a share on Thursday, but the price could be higher when shares begin trading under the FB symbol on the Nasdaq at 11 a.m. Eastern time (17:00 SA time).

Cameramen gathered around the Nasdaq building in New York's Time Square early on Friday as press throngs joined tourists and workers in the area. One of the billboards in the area prominently displayed the Facebook logo.

On Twitter and in office elevators the morning talk was betting how much Facebook's initial price would rise by the end of trading.

Some expect shares could rise 30 percent or more on Friday, despite ongoing concerns about Facebook's long-term money-making potential. An average of Morningstar analyst estimates put the closing price for Facebook shares on Friday at $50.

The IPO, expected to mint more than a thousand paper millionaires at the company, has received wall-to-wall media coverage and sparked hopes of a boom in sales of everything from San Francisco Bay area real estate to automobiles.

Facebook employees marked the event with an all-night “hackathon” at the company's Menlo Park, California, headquarters starting on Thursday evening, a tradition in which programmers work on side projects that sometimes turn into mainstream offerings.

The website, founded in a Harvard dorm room in 2004, has grown into the world's dominant social network with 900 million users.

At $38 a share, Facebook would trade at more than 100 times historical earnings versus Apple Inc's 14 times and Google Inc's 19 times.

For all the high expectations surrounding Facebook, the company faces challenges maintaining its momentum.

Some investors worry the company has not yet figured out a way to make money from the growing number of users who access Facebook on mobile devices such as tablets and smartphones. Meanwhile, revenue growth from Facebook's online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.

General Motors said on Tuesday it would stop placing ads on Facebook, raising questions about whether display ads on the site are as effective as they are in traditional media. - Reuters