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Facebook’s IPO announcement – live

Full coverage as the social network launches the biggest-ever stock market listing for a technology company

11.02pm: Viewers of The Social Network will wonder where Eduardo Saverin is. Saverin was Zuckerberg’s best friend at Harvard. He is not listed as a shareholder, but Facebook is only listing people and institutions with more than 5%. So he holds less than that, but we don’t know how much less.

11.00pm: Mark Zuckerberg will be selling some of his shares, but only so he can satisfy taxes that he will incur upon the exercise of an outstanding stock option to purchase 120m shares of the supervoting Class B common stock.

That means – although this conclusion is tentative – that Zuckerberg won’t be netting any cash directly from the float. But then he won’t need to. That day will come soon enough – and Wall Street doesn’t like to see a selling founder at this point in the company life cycle.

10.57pm: Here’s some analysis from US technology and media commentator Jeff Jarvis:

Mark Zuckerberg believes he is not changing human nature but enabling it. If you buy that—and I do—then I’d suggest buying his stock, for he has created the platform for the sharing economy.

Zuckerberg sees Facebook as an evolutionary step beyond Google and other net services. “They crawl the web,” he told me in an interview for my book, Public Parts. “But there’s nothing you can crawl to get information about people. It’s all in our minds. So in order to have that service, you need to build the tools that let people share.”

The two giants of the net are at war now over what I call signal generation: the ability to get us to generate data about ourselves—who we are, where we are, what we like, whom we like, what we buy, what we want, what we know, what we want to know—so they can serve us more relevant and valuable content, services, and advertising.

Facebook’s IPO filing says it is bringing in .7 billion in annual revenue, most from advertising. Last year, Google brought in ten times that. But Facebook has 845 million members, more than half of whom use it daily—an engagement number every newspaper and media organization should shoot for and would die for.

We’ll have more from him in due course.

10.55pm: Facebook is only selling the class A shares that have one vote per share in the flotation. The company has so little need for cash that Facebook will not generate any money in the flotation.

10.54pm: Bloomberg looks at who are set to be the biggest winners from the IPO. It repeats the point, Mark Zuckerberg could be worth .4bn.

Bloomberg also makes a comparison with Google:

Assuming the California-based company is valued at the top end of the range, Zuckerberg will own stock worth .4 billion. By comparison, Google Inc. co-founders Sergey Brin and Larry Page are each worth more than billion based on their ownership of that company’s shares.Larry Ellison owns stock worth about billion in Oracle Corp., the software company he founded in 197

10.49pm: Banks leading the float are Goldman Sachs, Morgan Stanley and JP Morgan. Their fee is typically 7% of the amount of money raised, seeing as you asked. Assisting them are Banc of America – Merrill Lynch, Barclays Capital [hurrah for Britain], and Allen and Company

10.48pm: More from Josh Halliday:

‘It may surprise some that China is mentioned more often than Twitter in Facebook’s S-1. Zuckerberg makes a couple of fleeting references to the microblogging site as a competitor, but Facebook has not ruled out a controversial expansion into China. “We continue to evaluate entering China,” the Facebook S-1 says. It adds later: “There are more than two billion global Internet users[…] and we aim to connect all of them”

10.46pm: You will no doubt be asking – how much is Facebook worth then. We don’t know yet. The company hasn’t yet put a price on its shares, because that only happens after a negotiation between the Wall Street banks floating the business and prospective buyers. The document that has been released today is the basis of that negotiation.

So – bn to 0bn is all we have to go on still. Which makes Mark Zuckerberg’s 28% stake worth…well you can do it…potentially bn.

10.42pm: Other share owners who hold more than 5% of the supervoting Class B shares are listed as follows.

Accel Partners, US venture capital – 11.4%
DST Global, Russian venture capital – 5.5%
Dustin Moskovitz – 7.6%

10.38pm: OK. Share ownership time.

Mark Zuckerberg owns 28.2% of the pre IPO share capital. Slightly more than we thought.

10.38pm: Eduardo Saverin—the press-shy founder of Facebook who was famously ousted from the company in its early days, has posted about the IPO on Facebook: “Here it is, what a ride! Site first launched February 4, 2004.”

10.36pm: Reuters has been crunching the numbers alongside us. Check out their analysis here.

10.36pm: Here’s an alternative link to the SEC data: http://www.scribd.com/doc/80165730/Facebook-IPO-Registration-Statement-on-Form-S-1

10.34pm: It’s the kind of structure that was used by media companies, such as Rupert Murdoch’s News Corp, to entrench the control of founders. It is also used by old British media companies, such as the company that owns the Daily Mail. The theory was that it was becoming unfashionable, but Facebook (and Google) has brought it back.

10.27pm: Mark Zuck also received perks worth 2,679 for costs related to personal use of aircraft chartered in connection and ,850 for costs related to estate and financial planning during 2011.

So his total pay and perks were ,487,362 in 2011.

10.26pm: This just in from Josh Halliday, who has been reading the Facebook filing.

Beyond the headline numbers, two figures really stood out for me. Where does Facebook generate revenue? Last year 85% of its .7bn revenue from advertising. More interestingly, 12% of the social network’s turnover came through Zynga, the maker of hugely popular games such as Farmville, Cityville and Mafia Wars. The social game maker Zynga, itself moving towards an IPO, began to make its first moves away from Facebook towards the end of last year.

10.25pm: Mark Zuckerberg salary is 0,000 (check that Stephen Hester). His bonus for the first half of 2011 was 0,500. But of course his shareholding is huge.

10.24pm: Here’s a nod to British culture. “Examples of popular Pages on Facebook include Lady Gaga, Disney, and Manchester United, each of which has more than 20 million Likes.”

10.23pm: Facebook has 845 million active users as of December 31, 2011, an increase of 39% as compared to 608 million as of December 31, 2010. Still growing.

10.20pm: You just got all of Zuckerberg’s IPO letter, but what stands out on first reading is his emphasis on the “The Hacker Way” as his company philosophy. He says that “hacking just means building something quickly or testing the boundaries of what can be done”. He describes hackers as “idealistic” and says this approach is how Facebook can develop so fast.

Here’s more:

The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo.

Hackers try to build the best services over the long term by quickly releasing and learning from smaller iterations rather than trying to get everything right all at once. To support this, we have built a testing framework that at any given time can try out thousands of versions of Facebook. We have the words “Done is better than perfect” painted on our walls to remind ourselves to always keep shipping.

10.16pm: OK, here’s the statement of intent. It’s described as a letter from Mark Zuckerberg.

LETTER FROM MARK ZUCKERBERG

Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.

We think it’s important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do. I will try to outline our approach in this letter.

At Facebook, we’re inspired by technologies that have revolutionized how people spread and consume information. We often talk about inventions like the printing press and the television — by simply making communication more efficient, they led to a complete transformation of many important parts of society. They gave more people a voice. They encouraged progress. They changed the way society was organized. They brought us closer together.

Today, our society has reached another tipping point. We live at a moment when the majority of people in the world have access to the internet or mobile phones — the raw tools necessary to start sharing what they’re thinking, feeling and doing with whomever they want. Facebook aspires to build the services that give people the power to share and help them once again transform many of our core institutions and industries.

There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on.

We hope to strengthen how people relate to each other.

Even if our mission sounds big, it starts small — with the relationship between two people.

Personal relationships are the fundamental unit of our society. Relationships are how we discover new ideas, understand our world and ultimately derive long-term happiness.

At Facebook, we build tools to help people connect with the people they want and share what they want, and by doing this we are extending people’s capacity to build and maintain relationships.

People sharing more — even if just with their close friends or families — creates a more open culture and leads to a better understanding of the lives and perspectives of others. We believe that this creates a greater number of stronger relationships between people, and that it helps people get exposed to a greater number of diverse perspectives.

By helping people form these connections, we hope to rewire the way people spread and consume information. We think the world’s information infrastructure should resemble the social graph — a network built from the bottom up or peer-to-peer, rather than the monolithic, top-down structure that has existed to date. We also believe that giving people control over what they share is a fundamental principle of this rewiring.

We have already helped more than 800 million people map out more than 100 billion connections so far, and our goal is to help this rewiring accelerate.

We hope to improve how people connect to businesses and the economy.

We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services.

As people share more, they have access to more opinions from the people they trust about the products and services they use. This makes it easier to discover the best products and improve the quality and efficiency of their lives.

One result of making it easier to find better products is that businesses will be rewarded for building better products — ones that are personalized and designed around people. We have found that products that are “social by design” tend to be more engaging than their traditional counterparts, and we look forward to seeing more of the world’s products move in this direction.

Our developer platform has already enabled hundreds of thousands of businesses to build higher-quality and more social products. We have seen disruptive new approaches in industries like games, music and news, and we expect to see similar disruption in more industries by new approaches that are social by design.

In addition to building better products, a more open world will also encourage businesses to engage with their customers directly and authentically. More than four million businesses have Pages on Facebook that they use to have a dialogue with their customers. We expect this trend to grow as well.

We hope to change how people relate to their governments and social institutions.

We believe building tools to help people share can bring a more honest and transparent dialogue around government that could lead to more direct empowerment of people, more accountability for officials and better solutions to some of the biggest problems of our time.

By giving people the power to share, we are starting to see people make their voices heard on a different scale from what has historically been possible. These voices will increase in number and volume. They cannot be ignored. Over time, we expect governments will become more responsive to issues and concerns raised directly by all their people rather than through intermediaries controlled by a select few.

Through this process, we believe that leaders will emerge across all countries who are pro-internet and fight for the rights of their people, including the right to share what they want and the right to access all information that people want to share with them.

Finally, as more of the economy moves towards higher-quality products that are personalized, we also expect to see the emergence of new services that are social by design to address the large worldwide problems we face in job creation, education and health care. We look forward to doing what we can to help this progress.

Our Mission and Our Business

As I said above, Facebook was not originally founded to be a company. We’ve always cared primarily about our social mission, the services we’re building and the people who use them. This is a different approach for a public company to take, so I want to explain why I think it works.

I started off by writing the first version of Facebook myself because it was something I wanted to exist. Since then, most of the ideas and code that have gone into Facebook have come from the great people we’ve attracted to our team.

Most great people care primarily about building and being a part of great things, but they also want to make money. Through the process of building a team — and also building a developer community, advertising market and investor base — I’ve developed a deep appreciation for how building a strong company with a strong economic engine and strong growth can be the best way to align many people to solve important problems.

Simply put: we don’t build services to make money; we make money to build better services.

And we think this is a good way to build something. These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits.

By focusing on our mission and building great services, we believe we will create the most value for our shareholders and partners over the long term — and this in turn will enable us to keep attracting the best people and building more great services. We don’t wake up in the morning with the primary goal of making money, but we understand that the best way to achieve our mission is to build a strong and valuable company.

This is how we think about our IPO as well. We’re going public for our employees and our investors. We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment. As we become a public company, we’re making a similar commitment to our new investors and we will work just as hard to fulfill it.

The Hacker Way

As part of building a strong company, we work hard at making Facebook the best place for great people to have a big impact on the world and learn from other great people. We have cultivated a unique culture and management approach that we call the Hacker Way.

The word “hacker” has an unfairly negative connotation from being portrayed in the media as people who break into computers. In reality, hacking just means building something quickly or testing the boundaries of what can be done. Like most things, it can be used for good or bad, but the vast majority of hackers I’ve met tend to be idealistic people who want to have a positive impact on the world.

The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo.

Hackers try to build the best services over the long term by quickly releasing and learning from smaller iterations rather than trying to get everything right all at once. To support this, we have built a testing framework that at any given time can try out thousands of versions of Facebook. We have the words “Done is better than perfect” painted on our walls to remind ourselves to always keep shipping.

Hacking is also an inherently hands-on and active discipline. Instead of debating for days whether a new idea is possible or what the best way to build something is, hackers would rather just prototype something and see what works. There’s a hacker mantra that you’ll hear a lot around Facebook offices: “Code wins arguments.”

Hacker culture is also extremely open and meritocratic. Hackers believe that the best idea and implementation should always win — not the person who is best at lobbying for an idea or the person who manages the most people.

To encourage this approach, every few months we have a hackathon, where everyone builds prototypes for new ideas they have. At the end, the whole team gets together and looks at everything that has been built. Many of our most successful products came out of hackathons, including Timeline, chat, video, our mobile development framework and some of our most important infrastructure like the HipHop compiler.

To make sure all our engineers share this approach, we require all new engineers — even managers whose primary job will not be to write code — to go through a program called Bootcamp where they learn our codebase, our tools and our approach. There are a lot of folks in the industry who manage engineers and don’t want to code themselves, but the type of hands-on people we’re looking for are willing and able to go through Bootcamp.

The examples above all relate to engineering, but we have distilled these principles into five core values for how we run Facebook:

Focus on Impact

If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.

Move Fast

Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they’re more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: “Move fast and break things.” The idea is that if you never break anything, you’re probably not moving fast enough.

Be Bold

Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that’s changing so quickly, you’re guaranteed to fail if you don’t take any risks. We have another saying: “The riskiest thing is to take no risks.” We encourage everyone to make bold decisions, even if that means being wrong some of the time.

Be Open

We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.

Build Social Value

Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.

Thanks for taking the time to read this letter. We believe that we have an opportunity to have an important impact on the world and build a lasting company in the process. I look forward to building something great together.

10.13pm: Facebook, 2011 quarterly revenue growth. No shortage of momentum.

Q1 2011 – 1m
Q2 2011 – 5m
Q3 2011 – 4m
Q4 2011 – ,131m

10.12pm: Very interesting: 12% of all Facebook revenue in 2011 came from Farmville games company Zynga. No wonder FB is so hot on media partnerships.

10.11pm: Compared to 2010, Revenue in 2011 increased ,737 million, or 88% compared to 2010. The increase was due primarily to a 69% increase in advertising revenue to ,154 million – advertising the major component of Facebook revenue.

10.09pm: Facebook has .9bn of cash on its balance sheet. Handy amount of money to make since it was set up from a Harvard dorm in 2004.

10.08pm: Net income for the past five years – you can see the rapid movement into profit.

2007 – $ -138m
2008 – $ -56m
2009 – $ 229m
2010 – $ 606m
2011 – $ 1,000m

10.05pm: Facebook revenues over the last five years. Impressive growth by any measure.

2008 – 3m
2009 – 2m
2010 – 7m
2010 – ,974m
2011 – ,711m

10.04pm: Pre-tax income shows just how high Facebook’s profit margin already is. Pre-tax for 2011 is .695bn, a margin of 45.6% of sales

10.03pm: Facebook revenues a bit lower than the widely rumoured .8bn, but the net profit at bn is higher than the numbers leaked.

9.57pm: Facebook’s revenue in 2011 was .1bn, with net profit of bn.

9.52pm: Facebook has filed with the Securities and Exchange Commission to raise bn in an initial public offering of stock in the US.

9.06pm: Facebook’s listing promises to be the float of the century.

Well, other than Google back in 2004. Facebook has announced it plans to go public, filing its intentions with the US Securities and Exchange Commission. We’ll gut the document and follow initital reaction here to a process that will be keenly scrutinised by anybody with the slightest interest in the future of the internet.

Can Facebook meet the inflated expectations? Can it prosper as a public company when every quarter’s progress will be monitored? And will the notoriously stage shy Mark Zuckerberg become more comfortable with the even higher public profile?

The loose talk pre-announcement is that Facebook will be valued at anywhere between bn and 0bn. Revenues in 2011 have been estimated at just short of bn, with further growth expected in 2012. Gawker last December, said that it had a leak of Facebook’s financials for the first nine months of 2011, which showed that the company was sitting on a cash pile of .5bn. Revenues for the period were .5bn, with operating profit of .2bn and net income of 4m. Let’s see if any of those figures are correct.

We are also expecting a clear fix as to who owns the shares – pre-flotation. Here’s the best breakdown circulating before the float. We’ll see if that’s accurate too.

Employees 30%
Mark Zuckerberg 24% (founder and CEO)
Digital Sky Technologies 10% (Russian VC)
Accel Partners 8% (Silicon Valley VC)
Dustin Moskowitz 6% (actual co-founder)
Eduardo Saverin 5% (sort of co-founder)
Sean Parker 4% (Justin Timberlake in the film)
Goldman Sachs clients 3%
Microsoft 1.3%

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