Facebook raises IPO price as good, bad buzz builds

(AP Photo/Seth Wenig) News about the Facebook IPO passes on a billboard outside of NASDAQ in Times Square in New York Tuesday.

New York ? Already expected to be the largest-ever initial public offering for an Internet company, Facebook is making its IPO even bigger.

The world?s largest online social network on Tuesday increased the planned price range for its stock to $34 to $38 per share in a filing with the Securities and Exchange Commission. That?s up from its previous range of $28 to $35. At the upper limit of $38, the sale would raise $12.8 billion.

The move, which values Facebook as high as $104 billion, comes amid growing investor excitement about the offering. Analysts are comparing the frenzy surrounding Facebook?s IPO to Google Inc.?s in 2004, though in sheer size the latter pales in comparison.

At the same time, half of Americans think Facebook is a passing fad and that the expected value is too high, according to a new Associated Press-CNBC poll conducted before the company raised its expected stock price on Tuesday. Only a third of those surveyed said they think Facebook?s expected value is appropriate.

Much of Wall Street doesn?t share that sentiment.

"Demand is obscenely high," said Scott Sweet, owner of advisory firm IPOBoutique, about the offering. That said, he notes Facebook still has to be careful not to increase the price too much, so the stock still does well when it begins trading on the Nasdaq Stock Market, as expected, on Friday.

"This is a deal that literally must work, in that it is so high-profile," he said. "It would really level the IPO market if Facebook flopped."

As it stands, Facebook would be the fourth-largest U.S. IPO in history, edging out AT&T Wireless, whose 2000 IPO raised $10.6 billion according to Renaissance Capital, an IPO investment advisory firm.

The AP-CNBC survey found that of average Americans who invest in the stock market, 58 percent think Facebook?s valuation is too high at around $100 billion. That?s larger than well-known companies such as Ford and Kraft but smaller than Google or Microsoft. About 3 in 10 investors called the expected value fair.

Perhaps more troubling, although the survey also showed that more than 40 percent of American adults log in to the site ? to share news, personal observations, photos and more ? at least once a week, many of them don?t have a very high opinion of Facebook or trust it to keep their information private.

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If Facebook the company were a Facebook user, it would have a lot of virtual friends but not many real ones, the poll suggested.

Users? distrust limits the value of the site?s ads. Advertisers want to target their messages to the people most likely to respond to them.

Those concerns aside, price worries won?t necessarily stop would-be investors. Facebook raised the price range in response to strong demand for its stock, and it?s possible that the stock could price even higher later in the week.

The company is offering 337 million shares in its IPO. Of those, 157 million shares aren?t coming from the company, but from existing stockholders, including the company?s earliest investors and CEO Mark Zuckerberg. Even after the offering, Zuckerberg will remain Facebook?s single largest shareholder. And he will control the company through 57 percent of its voting stock. Based on the high end of the price range, he?ll get about $1.15 billion from the stock he is selling.

The IPO is is expected to raise more than 10 times as much as the $1.67 billion raised in Google eight years ago. At a value of $38 per share, the high end of Facebook?s expected range, Facebook would generate $6.84 billion on its shares. Existing stockholders would collectively make $5.98 billion.

Even at the higher price range, it?s going to be tough for the company?s fans and everyday investors to get in on the IPO. Most of the shares are expected to go to people with connections to the company or those who have large, active accounts with the big banks or brokerage firms directly involved in the stock sale.

Morgan Stanley leads the team of 33 underwriters selected for the Facebook offering, followed by JPMorgan Chase and Goldman Sachs. The company will trade under the ticker symbol "FB."

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