A Facebook Inc sign at the entrance of the company's headquarters in Menlo Park, California. Facebook hasn't specified the number or price of shares it will offer in its IPO. [David Paul Morris / Bloomberg]

Social-networking company appoints Morgan Stanley as lead underwriter for proposed listing

SAN FRANCISCO - Facebook Inc, the social-networking website that in eight years changed the way the world communicates, filed to raise $5 billion in the largest Internet IPO on record.

On Wednesday, Facebook, whose meteoric rise spawned an Oscar-winning film and captivated Wall Street, named Morgan Stanley as the lead underwriter on the IPO, while reporting a 24-fold increase in sales over the past four years to $3.71 billion in 2011.

The planned IPO dwarfs Google Inc's 2004 offering and tests whether social-networking providers deserve market values that rival such established companies as McDonald's Corp and Caterpillar Inc. The company is considering a valuation of $75 billion to $100 billion, people with knowledge of the matter said last week.

"The $100 billion valuation that's being tossed around just puts it at a level we've never seen," said Jeffrey Sica, chief investment officer of Sica Wealth Management LLC, which oversees $1 billion. "They have to be able to show that not only do they deserve to be at that level, but they have multiple channels to create new revenue."

Sales surge

Co-founded in 2004 by then 19-year-old Mark Zuckerberg, Facebook has grown into the world's dominant social-networking site, squelching competitors such as MySpace Inc with its more than 800 million users. While Facebook's sales almost doubled last year, the company faces increasing competition from rivals such as Google, which debuted its own social-networking service last year, and short-message social site Twitter Inc, the filing shows.

A $100 billion market capitalization would value Facebook at 26.9 times trailing 12-month sales, more than double Google's valuation when the search-engine operator went public in 2004. Facebook recruited Chief Operating Officer Sheryl Sandberg, a former Google executive, in 2008 to help expand the company globally.

Facebook hasn't specified the number or price of shares it will offer, and the $5 billion amount is a placeholder used to calculate fees and may change. The US Securities and Exchange Commission's public website suffered a slowdown on Wednesday as traffic surged, forcing the agency to bring on additional capacity, according to spokesman John Nester.

The stock would trade under the symbol FB on either the Nasdaq Stock Market or the New York Stock Exchange. The company plans to use the proceeds for working capital and other general corporate purposes.

In addition to Morgan Stanley, Facebook has hired JPMorgan Chase & Co, Goldman Sachs Group Inc, Bank of America Corp, Barclays PLC and Allen & Co to manage the IPO.

Net income last year surged by almost two-thirds to $1 billion, the filing showed. Last year, Facebook said it expects US regulators to require that it disclose financial results by April 30, if the company hadn't gone public by then. Facebook decided to wait until this year for its IPO to give Chief Executive Officer Zuckerberg more time to gain users and boost sales, people familiar with the matter said in 2010.

Zuckerberg, 27, is the company's top stockholder with 28.4 percent of the shares, the filing shows. He also has proxy agreements with fellow stockholders that potentially give him voting control over more than half the shares.

Social-media IPOs

Accel Partners remains the top outside stakeholder with 11.4 percent of the investor votes, while Dustin Moskovitz, one of Zuckerberg's co-founders, holds voting power of 7.6 percent.

Facebook would follow a crop of social-media companies that went public last year, the biggest year for US Internet IPOs in more than a decade, according to Bloomberg data. Nineteen companies raised $6.6 billion in 2011, the data show. Professional-networking site LinkedIn Corp, music-streaming service Pandora Media Inc, daily-deal site Groupon Inc and social-gaming company Zynga Inc all sold shares last year.

Bloomberg News