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Facebook Kicks Off Highly Anticipated IPO

  • RFE/RL

A man takes a picture of a monitor showing a welcoming message for Facebook's listing on the Nasdaq Marketsite prior to the opening bell in New York on May 18.

A man takes a picture of a monitor showing a welcoming message for Facebook's listing on the Nasdaq Marketsite prior to the opening bell in New York on May 18.

Facebook, the world's largest Internet social network, has started selling its shares to regular investors in one of the largest-ever stock flotations.

In the first hours after founder and Chief Executive Mark Zuckerberg rang the bell to open trading, Facebook shares traded up 8 percent on the technology-heavy Nasdaq stock exchange.

Zuckerberg was cheered by a crowd of hundreds of employees at Facebook's headquarters in California as he rang the bell remotely for the New York-based Nasdaq.

The stock, priced at $38 per share, was to begin trading under the symbol "FB" on the Nasdaq, giving the leading website $104 billion at its market debut.

Many investors are enthusiastic about the profit potential -- skeptics, however, have raised questions about the company's long-term prospects in the fast-moving social-networking world. Facebook now has some 900 million users worldwide.

The initial public offering (IPO) is expected to give Zuckerberg a net worth of nearly $20 billion.

'Demand Driven By Emotion'

The company was started in a Harvard dormitory room eight years ago, and has been hailed for changing the way people communicate online.

In the IPO, Facebook is selling about an 18 percent stake in the company. Amid high investor interest, Facebook announced this week it would be offering more shares than initially planned.

Arvind Bhatia, a senior research analyst at the U.S.-based Sterne Agee brokerage firm, says after trading begins later on May 18, the share price could skyrocket.

"I think the short-term actions of the stock will be driven more by emotion, will be driven more by just the demand-and-supply economics, you know, not enough shares going public and the demand is several-fold," Bhatia says.

Zuckerberg, who turned 28 on May 14, will remain the largest shareholder. Even after the stock flotation, he will own more than 25 percent of the stock.

He will also continue to control the company, holding more than 50 percent of voting rights.

The IPO will also turn several of the other initial owners into billionaires overnight.

The high-profile company was also the subject of an Oscar-winning Hollywood movie last year, "The Social Network."

New Challenges

But market analysts say that Facebook faces challenges maintaining its growth.

Katherine Phillips, a business-management expert at Columbia Business School in New York, says one of those challenges will be sticking to what she describes as the company's "core values."

"The cultural core, the cultural values that Facebook had, they will have to be very careful about changing that. They have to be consistent, and that's where the creativity comes in," Phillips says.

"They have to figure out creative ways to stick with the core values but at the same time recognize that they are a growing and changing company."

The company is seen as having huge potential for online advertising. But it generated just $1 billion in profits in 2011.

Some have voiced concerns that with investors now demanding substantial returns, Facebook could alienate users by placing too much emphasis on online advertising.

Concerns have also been raised about the privacy policies of the company, which holds huge amounts of personal information about its millions of users.

With reporting by AFP, Reuters, and AP