Will Facebook Meet Accelerating Value Expectations?

Facebook’s valuation could potentially exceed $100 billion after the social network raised the price target for its initial public offering to between $34 and $38 per share, in response to strong demand. At $36, Facebook will raise $12.1 billion with its IPO. Google (NASDAQ:GOOG) had raised just short of $2 billion in 2004, while Groupon (NASDAQ:GRPN) received $700 million last year and Zynga (NASDAQ:ZNGA) brought in $1 billion.

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Facebook had previously set its target between $28 and $35, but was widely expected to raise it as investor interest perked up. The new price range is an increase of 21 percent on the lower end. The company is scheduled to put a final price on its shares on Thursday and will begin trading on Friday.

Company executives have spent the past two weeks on the road meeting with potential investors and measuring the demand for the stock. According to Reuters, the IPO is already “well oversubscribed,” leading the company to close the books on Tuesday, two days ahead of schedule. Facebook will trade on NASDAQ under the symbol FB, with Morgan Stanley (NYSE:MS), JPMorgan (NYSE:JPM), and Goldman Sachs (NYSE:GS) underwriting the offering.

Facebook is planning to sell 337.4 million shares, or 12.3 percent of the company. With a full company valuation between $93 billion and $104 billion, it rivals the current market capitalization of Amazon.com (NASDAQ:AMZN) and beats those of Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL) together.

But while the company’s popularity with investors is undoubted, questions are still being asked about its ability to use the vast amount of data from its almost a billion users and convert it into a viable business model. The company’s revenue growth had showed signs of slowing in the first quarter of 2012.

Analysts and investors believe the social network still has some way to go in better matching advertisements to people, while finding other channels of revenue such as letting people buy more goods and services through its platform. Facebook will also have to get rid of its reputation of being a violator of its users’ privacy and keep regulatory scrutiny away.

But the most urgent challenge probably lies in learning to make money on mobile devices. Mobile use continues to grow fastest in some of Facebook’s largest markets, including the United States, India, and Brazil, with more than half of Facebook’s 901 million users already accessing the site through mobile devices. However, the social network acknowledges it makes little to no money on the platform and that “our ability to do so successfully is unproven.”

“When you’re operating as a public company, life is very different,” Altimeter Group analyst Susan Etlinger told the New York Times. “We haven’t seen that play out yet. It’s going to take a few quarters to figure out what a public Facebook is going to look like.”

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