Sunday, October 17, 2021

Facebook files for IPO, no IPO: A fact-checking guide

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A major tech company just filed for an initial public offering and the timing could not be more propitious. Facebook’s stock has more than doubled in the past year, which has also given the company a huge cash stockpile, some $122 billion worth of shares, and the ability to raise more money — from more investors.

So it makes sense that it’s chosen to do an IPO now, and that it’s interested in a mammoth offering, according to a filing with the Securities and Exchange Commission, to give those shares to the market. But that, at least, is not quite the way it seems.

“It’s not an IPO,” noted Brian Wieser, an analyst with Pivotal Research. “But it’s kind of weird — a big enough high-profile public offering that I’m curious what it is.”

What is it? Here’s a partial explanation of the offering, from a different Silicon Valley tech company:

Microsoft announced back in January that it is selling up to $20 billion worth of its shares in the company. What’s more, Morgan Stanley is leading the transaction.

And only a day ago, Airbnb, another young company, filed for an initial public offering, the sale of a direct sale of a small fraction of its common stock. Airbnb announced the move on its blog. A day earlier, it filed a registration statement with the SEC. Morgan Stanley is also the lead underwriter.

“This tells me the company is not wildly growing or deep cash-flow positive,” said Wieser, who has his doubts about Airbnb as a potential public company, in part because of the share offering.

Still, it is intriguing that Facebook is a filer with an offer of as much as $100 billion. But the company has been in the money of late, and in April announced a $12 billion acquisition of a major artificial intelligence company, called Coursera.

For all intents and purposes, the filing could be “a way for the market to gauge what those shares are worth,” said Ryan Wittkopf, a research manager with Prudential Equity Group. “That could be a signal to people: this is not a bad time to buy, although if this IPO were to be small in size, it would help me to make my decision.”

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