Facebook Friday: Investors anxiously await IPO

  BARBARA ORTUTAYNEW YORK -- Facebook found more than enough friends.

The world's definitive online social network said Thursday that it raised $16 billion for itself and its early investors in an initial public stock offering that values Facebook at $104 billion. That's more than Amazon.com and other well-known companies such as Kraft, Walt Disney and McDonald's.

It's a big windfall for a company that began eight years ago with no way to make money.

Facebook priced its IPO at $38 per share on Thursday, at the top of expectations. Now, regular investors will have a chance to buy stock in Facebook for the first time. The stock will begin trading on the Nasdaq Stock Market sometime Friday morning. The ticker symbol will be FB.

Facebook's offering is the culmination of a year's worth of Internet IPOs that began last May with LinkedIn Corp. Since then, a steady stream of startups focused on the social side of the Web has gone public, with varying degrees of success. It all led up to Facebook, the company that's come to define social networking by getting 900 million people around the world to share everything from photos of their pets to their deepest thoughts.

It has done so while managing to become one of the few profitable Internet companies to go public recently. It had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In all of 2011, it earned $1 billion, up from $606 million a year earlier. That's a far cry from 2007, when it posted a net loss of $138 million and revenue of $153 million.

"They could have gone public in 2009 at a much lower price," said Nick Einhorn, research analyst at IPO investment advisory firm Renaissance Capital. "They waited as long as they could to go public, so it makes sense that it's a very large offering."

Facebook Inc.'s valuation is the third-highest in an IPO, according to Dealogic, a provider of financial data. Only two Chinese banks, Agricultural Bank of China in 2010 and Industrial and Commercial Bank of China in 2006, have been worth more. They were worth $133 billion and $132 billion, respectively. By another measure -the amount raised- Facebook ranks third among U.S. IPOs. The largest was Visa, which raised $17.9 billion in 2008. No. 2 was Enel, a power company, and No. 4 was General Motors, according to Renaissance Capital.

The $38 share price is the price at which the investment banks arranging the offering will sell the stock to their clients. In an IPO, the banks buy the stock first from the company and the early investors and then sell to the public. If extra shares reserved to cover additional demand are sold as part of the transaction, Facebook and its early investors stand to reap as much as $18.4 billion.

For a company that was born in a Harvard dormitory and went on to reimagine online communication, the stock sale means more money to build on the features and services it offers users. It means an infusion of money to hire the best engineers to work at its sprawling Menlo Park, Calif., headquarters, or in New York City, where it opened an engineering office last year.

And it means early investors, who took a chance seeding the young social network with start-up funds six, seven and eight years ago, can reap big rewards. Peter Thiel, the venture capitalist who sits on Facebook's board of directors, invested $500,000 in the company in 2004. He's selling nearly 17 million of his shares in the IPO, which means he'll get some $640 million. He will hold on to about 28 million shares, worth $1.06 billion.

The offering values Facebook, whose 2011 revenue was $3.7 billion, at as much as $104 billion. The sky-high valuation has its skeptics, who worry about signs of a slowdown and Facebook's ability to grow in the mobile space when it was created with desktop computers in mind. Rival Google Inc., whose revenue stood at $38 billion last year, has a market capitalization of $207 billion.

"There seems to be somewhat of a hype around the stock offering," says Gartner analyst Brian Blau.

That may be an understatement.

Facebook's IPO dominated media coverage in the weeks and days leading up to the event. CEO Mark Zuckerberg's hoodie made headlines when he wore it to a meeting with investors as did General Motors' decision this week to stop advertising on the site -and rival Ford's affirmation that its Facebook ads have been effective.

There are more than a few reasons for the exuberance. First, there's Facebook's sheer size and high profile. The company grew from a college-only social network to an Internet phenomenon embraced by legions of people, from teenagers to grandmothers to pro-democracy activists in the Middle East.

Secondly, it's personal.

"It's probably one of the first times there has been an IPO where everyone sort of has a stake in the outcome," Blau says. While most Facebook users won't see a penny from the offering, they are all intimately familiar with the company.

And then there's Zuckerberg, who turned 28 on Monday. He has emerged as the latest in a lineage of Silicon Valley prodigies who are alternately hailed for pushing the world in new directions and reviled for overstepping their bounds. He counted the late Apple CEO Steve Jobs among his mentors, and he became one of the world's youngest billionaires - at least on paper - well before Facebook went public. A dramatized and less-than-flattering version of Facebook's founding was the subject of a Hollywood movie that won three Academy Awards last year, propelling Zuckerberg even further into the public spotlight.

Though Zuckerberg is selling about 30 million shares, he will remain Facebook's largest shareholder. Even after the IPO, he will own 503.6 million shares, or 32 percent of Facebook's total shares. At the $38 share price, his stake in the company is worth $19.1 billion. Zuckerberg will control the company with 56 percent of its voting stock as a result of agreements he has with other shareholders who promise to vote his way.

The set-up helps to ensure that he and other executives keep control as the demands of Wall Street for short-term returns exert new pressures on the company.

True to form, Zuckerberg and Facebook's engineers are ringing in the IPO on their own terms. The company is holding an overnight "hackathon" Thursday, where engineers stay up writing programming code to come up with new features for the site. On Friday morning, Zuckerberg will ring the Nasdaq opening bell from Facebook's headquarters a continent away.

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Miss. River spillway opens, towns await floodwater

  By MARY FOSTER and MELINDA DESLATTEMORGANZA, La. -- Over the next few days, water spewing through a Mississippi River floodgate will crawl through the swamps of Louisiana's Cajun country, chasing people and animals to higher ground while leaving much of the land under 10 to 20 feet of brown muck.

The floodgate was opened Saturday for the first time in nearly four decades, shooting out like a waterfall, spraying 6 feet into the air. Fish jumped or were hurled through the white froth and what was dry land soon turned into a raging channel.

The water will flow 20 miles south into the Atchafalaya Basin, and from there it will roll on to Morgan City, an oil-and-seafood hub and a community of 12,000. In the nearby community of Stephensville, rows of sandbags were piled up outside nearly every home.

Merleen Acosta, 58, waited in line for three hours to get her sandbags filled by prisoners, then returned later in the day for more bags.

Floodwaters inundated Acosta's home when the Morganza spillway was opened in 1973, driving her out for several months. The thought of losing her home again was so stressful she was getting sick.

"I was throwing up at work," she said.

The opening of the spillway diverted water from Baton Rouge and New Orleans, and the numerous oil refineries and chemical plants along the lower reaches of the Mississippi. Shifting the water away from the cities eased the strain on levees and blunts the potential for flooding in New Orleans that could have been much worse than Hurricane Katrina.

C.E. Bourg stopped by a hardware store in the shadow of the Morgan City floodwalls to buy grease for his lawnmower and paint - items on his "honey-do list." Floodwaters came close to overtopping in 1973, but since then, they have been raised to 24 feet and aren't in danger of being overtaken.

Bourg, an attorney, said he represented a worker who was injured on the 70s-era floodwall project and learned a lot about how they were built.

"I got a copy of the plans," he said. "This one's built right, unlike the ones in New Orleans."

The Morganza spillway is part of a system of locks and levees built after the great flood of 1927, which killed hundreds and left many more without homes. When the Morganza opened, it was the first time three flood-control systems have been unlocked at the same time along the Mississippi River, a sign of just how historic the current flooding has been.

Earlier this month, the corps intentionally blew holes into a levee in Missouri to employ a similar cities-first strategy, and it also opened a spillway northwest of New Orleans about a week ago.

Snowmelt and heavy rain swelled the Mississippi, and the river has peaked at levels not seen in 70 years.

In Krotz Springs, La., one of the towns in the Atchafalaya River basin bracing for floodwaters, phones at the local police department rang nonstop as residents sought information on road closings and evacuation routes.

Like so many other residents downstream of the Morganza, Monita Reed, 56, recalled the last time it was opened in 1973.

"We could sit in our yard and hear the water," she said as workers constructed a makeshift levee of sandbags and soil-filled mesh boxes in hopes of protecting the 240 homes in her subdivision.

About 25,000 people and 11,000 structures could be affected by the oncoming water, and some people living in the threatened stretch of countryside - an area known for fish camps and a drawling French dialect - have already fled. Reed's family packed her furniture, clothing and pictures in a rental truck and a relative's trailer.

"I'm just going to move and store my stuff. I'm going to stay here until they tell us to leave," she said. "Hopefully, we won't see much water and then I can move back in. "

It took about 15 minutes for the one 28-foot gate to be raised in the middle of the spillway. The corps planned to open one or two more gates Sunday in a painstaking process that gives residents and animals a chance to stay dry.

Michael Grubb, whose home is located just outside the Morgan City floodwalls, hired a contractor this week to raise his house from 2 feet to 8 feet off the ground. It took a crew of 20 workers roughly 17 hours to jack up the house onto wooden blocks.

"I wanted to save this house desperately," said Grubb, 54.

"This has tapped us out. This is our life savings here, but it's worth every penny."

Three feet of water flooded Grubb's home the last time the Morganza spillway was opened.

Water from the swollen Atchafalaya River already was creeping into his backyard, but Grubb was confident his home will stay dry.

He has a generator and a boat he plans to use for grocery runs. The water from the spillway was expected to reach Morgan City around Tuesday.

"This is our home. How could we leave our home?" he said.

The crest of the Mississippi was still more than a week away from the Morganza spillway, and when it arrives, officials expect it to linger. The bulge has broken river-level records that had held since the 1920s in some places. As the water rolled down the river, the corps took drastic steps to protect lives.

The corps blew up a levee in Missouri - inundating an estimated 200 square miles of farmland and damaging or destroying about 100 homes - to take the pressure off floodwalls protecting the town of Cairo, Ill., population 2,800.

The Morganza flooding is more controlled, however, and residents are warned by the corps each year in written letters, reminding them of the possibility of opening the spillway.

At the site of the spillway, water splashed over the gates on one side before a vertical crane hoisted the 10-ton, steel panel.

Typically, the spillway is dry on both sides.

This is the second spillway to be opened in Louisiana. The corps used cranes to remove some of the Bonnet Carre's wooden barriers, sending water into the massive Lake Ponchatrain and eventually the Gulf of Mexico.

By Sunday, all 350 bays at the 7,000-foot Bonnet Carre structure were to be open. The Morganza, a 4,000-foot long structure built in 1954, was expecting to only open up about a quarter of its 125 gates.

The spillways could be opened for weeks, or perhaps less time, if the river flow starts to subside.

In Vicksburg, Miss., where five neighborhoods were under water, a steady stream of onlookers posed for pictures on a river bluff overlooking a bridge that connects Louisiana and Mississippi. Some people posed for pictures next to a Civil War cannon while others carried Confederate battle flags being given away by a war re-enactor.

Larry and Paulla Dalrymple spent part of the day with a video camera, filming the river roll past a casino and swirl around the giant bridge pilings.

"Wow. It's really running,"' Paulla said. "It's amazing what the water can do - what it's doing to people's lives."

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Deslatte reported from Krotz Springs. Associated Press writers Michael Kunzelman in Morgan City, La. and Holbrook Mohr in Vicksburg, Miss., also contributed to this report.

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