As the financial world buzzes with anticipation heading to Facebook's IPO tomorrow it looks like early investors in the company are ready to sell their shares. The venture capitalists who invested in the company in funding attempts from the early days of the company are privileged to information that public investors are not. Their returns will surely be large though it will depend on what stage of the company's evolution they got involved.
Many firms have increased the amount of stock they will part with as part of the offering. Goldman Sachs (NYSE:GS) will now offer half of its stock compared with a previously enumerated 23%. Tiger Global Management has increased its offering from 7% to 50%, and Peter Thiel has increased their share from 20% to half of their stock. The firm's look to be willing to part with more and more of their stock as the huge valuation of the company offers the ultimate temptation.
Mark Zuckerburg and Microsoft Corp. (NASDAQ:MSFT) are among those who will not alter the amount of stock they are to sell. Zuckerberg will offer 6% of his stake in the firm as part of the offering. Zuckerberg will retain a 57% controlling interest in the firm after the IPO giving investors very little control in the future of the firm. That fact seems to irk investors less than it would with another company. Traders seem willing to trust the current CEO with the firm's future.
Facebook shares are set to open at around $35 but the price is predicted to jump quickly, possibly to double their initial value in the same day of trading. As with many popular offerings the firm's shares are expected to trade at a premium early on but settle down to a lower more stable price level after the initial bubble goes away. The company is expected to be valued at almost $100 billion though later in the day it could be worth much more than that.
Insiders are likely to earn a lot of money from tomorrow's trading. After the dust has settled there will be quite a few billionaires sitting around Facebook's headquarters. The firm's most loyal employees have been gifted with stock throughout their tenure.
Tomorrow's IPO will be an exciting one. Facebook's offering may set the standard for how tech companies operate in the future and how they act with the market. That doesn't mean everybody should invest. A hot IPO does not make a hot stock.