Today is the day that all of us have been waiting for. Facebook finally goes public today, in what is easily one of the biggest IPOs in American history. On Thursday, it finally priced its IPO at the upper end of its revised range of $34 to $38, raising $16 billion by selling 421.2 million shares at $38 each. This final price values Facebook at more than $100 billion after accounting for stock dilution.
Though it’s likely that Facebook’s stock will surge even higher in the initial days of trading due to the extremely high amount of interest in its stock by institutional and retail investors, we value Facebook at just above $89 billion, after accounting for the IPO proceeds based on the diluted share count. Facebook will receive only part of the total cash raised, around $6.8 billion while the rest will go to other selling shareholders.
Facebook’s currently valuation values it at slightly more than half Google’s current market cap and more than Amazon’s. Our valuation sits nearly 10% below the market valuation, and is based on a discounted cash flow analysis of Facebook’s core businesses — social text and display advertising, virtual goods transactions and a reasonable assumption that it will try to venture into social commerce next.
We have a $89 billion Trefis valuation estimate for Facebook, which translates to a $33 Trefis price estimate based on its diluted share count. Facebook is the largest social network in the world with more than 900 million monthly active users. It competes primarily with much smaller competitors like Google+, Twitter, LinkedIn (NYSE:LNKD) and Pinterest in the social networking space, and with Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Yahoo (NASDAQ:YHOO) for online advertising dollars.