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Facebook Prices IPO at $38 a Share (FB)

Social networking giant Facebook completed its much-awaited IPO after-market close on Thursday. The IPO has been priced at $38 a share, which is the high-end of the expected range of $34-$38 per share.

Facebook’s IPO is the largest Internet IPO ever. The social networking company raised around $16 billion in the IPO and has been valued at $104 billion, which makes it larger than Starbucks Corp. (NASDAQ: SBUX) and Hewlett-Packard Company (NYSE: HPQ) combined. In fact, there is intense speculation on how much higher FB’s valuation will rise once shares commence trading. If recent Internet IPOs are any indication, Facebook shares could be extremely volatile in the next few months.

According to Tim Loughran, a finance professor at the University of Notre Dame, a 15% to 20% pop is in the realm of possibility. Loughran told Fox Business that given Facebook already moved its IPO range up and increased the size, that is a bullish sign to begin with.

Shares of Facebook will begin trading on the NASDAQ today under the ticker FB.

Founded in 2004, Facebook has become the world’s most dominant social networking sites, with 900 million users. The IPO would make founder and CEO Mark Zuckerberg one of the richest men in the world.

Although Facebook’s IPO has generated significant interest from all quarters, there have questions about the high valuation. At $38 per share, Facebook would trade at more than 100 times historical earnings. This is substantially higher that what investors paid for Google Inc. (NASDAQ: GOOG) when it listed its shares a few years ago. Google currently trades at 19 times historical earnings. Apple Inc. (NASDAQ: AAPL), the world’s biggest technology company, currently trades at 14 times historical earnings.

Facebook also faces the challenge to maintain its growth momentum. In recent months, Facebook’s online advertising revenue growth has slowed down.


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