Facebook Inc. priced its shares in its initial public stock offering at $38 late Thursday, setting the stage for its historic market debut Friday.
The IPO values Facebook at $104 billion, the largest-ever for a newly public company. The $18.4 billion that Facebook is expected to raise in the IPO itself would be the second-largest in U.S. history, trailing only the $19.65 billion of Visa Inc. in 2008.
The Facebook pricing comes at a jittery moment for the stock market, which suffered a deep drop Thursday in a continuation of the weakness that has gripped share prices this month.
The Dow Jones industrial average sank 156.06 points, or 1.2 percent, to 12,442.49. It has fallen 6.3 percent from its recent peak May 1. The
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technology-laden Nasdaq composite, on which Facebook will begin trading Friday, slumped 60.35 points, or 2.1 percent, to 2,813.69.
Facebook's debut has dominated Silicon Valley and Wall Street in recent weeks, as the company and the financial markets geared up for the most anticipated IPO since Google Inc. in 2004.
The frenzy has been all the more intense given that Facebook was launched only eight years ago in Mark Zuckerberg's college dorm room. The company earned $1 billion last year, up 65% from the prior year. Revenue climbed 88 percent to $3.7 billion and is projected to rise 65 percent to $6.1 billion this year, according to research firm EMarketer Inc.
"There's never been a company that's gone from inception to IPO with this kind of valuation," said Francis Gaskins, editor of IPOdesktop.com in Marina del Rey. "It's a rocket ship that's taken off."
The offering would raise $16 billion initially, and ultimately up to $18.4 billion as the Wall Street investment banks handling the deal distribute additional "over-allotment" shares, as is common in sought-after IPOs.
But even as the excitement has built, so has fear that individual investors rushing into the stock could be setting themselves up for a fall.
Facebook announced Wednesday that Goldman Sachs Group Inc. and other prominent insiders have significantly raised the number of shares they're unloading in the IPO, a sign that the professional investors in the best position to handicap Facebook's investment merits are taking the opportunity to lighten their holdings. Their selling pushed up the size of the IPO 25 percent.
The stock is set to open an hour and a half after the Nasdaq officially opens for business. The late start is designed to allow for an orderly opening considering the large number of shares expected to be traded.