Irish Facebook employees set to like share windfall
Facebook's £7.25bn share sale moved a step closer yesterday after an 'investor roadshow' kicked off in the US.
The roadshow is aimed at drumming up interest ahead of the year's biggest Wall Street technology initial public offering (IPO). Facebook's IPO is the most-watched business deal of the year.
The company is hoping to raise £7.25bn by selling around 12% of its shares - if it comes off it will value the online social networking site at a staggering £58bn.
It's good news for employees at Facebook in Dublin, where around one in three of the 400 staff hold company shares.
Individual Irish staff are in line to earn six-figure windfalls when the social networking site goes ahead with plans to sell shares, if they opt to cash out of share options and profit-sharing securities known as 'restricted stock units'. The Facebook deal is being seen as a bellwether for the financial sector as well as media and technology industries.
Many fear an overvaluation of Facebook could herald the start of a dangerously unsustainable second 'tech bubble'.
Despite such fears, Facebook has been given its first 'buy' recommendation from stock analysts, who suggest share prices could rise by around 50% from even a toppy valuation. The 'buy' recommendation has been made by US broker Wedbush Securities, which set a target price of $44 (£27) each for the stock.
In an upbeat assessment, analyst Michael Pachter rated the shares 'outperform', the equivalent of recommending that clients buy the shares. That is unusual before a company has even floated on the stock market.
The target price Wedbush set is well over the $28 to $35 per share range currently being guided for the IPO, but the analysts warn it may take years for the shares to reach their full potential.
Facebook's earnings potential may not be realised until the middle of this decade as chief executive officer Mark Zuckerberg focuses on the user experience, Mr Pachter said.
Last week Facebook filed papers saying it plans to raise $11.8bn (£7.25bn) from an IPO by offering about 337.4m shares for $28 to $35 each.
Facebook itself is offering 180m of the shares, while existing owners such as Accel Partners and Digital Sky Technologies are offering 157.4m shares, according to the filing.
Mr Zuckerberg is offering to sell 30.2m of his 533.8m shares.
Even that fraction is enough to make him a fabulously wealthy man, although the US tax system will actually take the lion's share of proceeds from his sale.
That's because Mr Zuckerberg faces an 85% tax bill of around €700m on the money he's set to reap from the sale - just a fraction of his Facebook internet empire.
Back in the Republic the Revenue Commissioners will be entitled to just 30% of the Irish employees' windfalls, based on capital gains on the difference between what Irish employees pay for the shares and the price that they eventually actually sell them at.