Some of Facebook’s earliest backers plan to sell an additional $3bn worth of shares in Thursday’s initial public offering, as they take advantage of a wave of public interest in the social network group’s flotation.
The move will increase the number of shares on offer by 25 per cent, with proceeds flowing to existing investors such as Goldman Sachs, Tiger Global Management and Accel Partners.
Investor demand has been stoked by a cross-country US roadshow over the past two weeks, allowing Facebook to increase the size of its offering from $12bn to as much as $18bn.
However, the company continues to rankle some large institutional investors who fear that the IPO’s rising price and heavy insider selling could make Facebook shares more volatile after their market debut. The company lifted its price range to $34 to $38 this week, from the $28 to $35 initially indicated.
“We’re seeing a whole new level of insider selling. It went from something you can explain away [to potential investors] to something that’s harder to,” said Sam Hamadeh, a former banker and chief executive of PrivCo, a boutique research firm.
Typical IPOs see limited selling by management and early investors, as incoming shareholders expect the interests of key board members to remain aligned with their own.
The market for Facebook’s shares is “massively oversubscribed” with especially strong demand by individual investors, according to a survey of investors by IPO Boutique, an advisory firm.
The deal now could raise as much as $18bn if, as expected, an overallotment is exercised, making it the second-largest US IPO ever.