Facebook makes pitch to likely Boston investors
Company prepares for IPO; Zuckerberg holds private session
The excitement surrounding Facebook Inc.’s forthcoming Wall Street debut arrived in Boston Tuesday as the company’s top executives pitched the massive social media company to hundreds of potential investors, and Mark Zuckerberg, its 27-year-old celebrity chief executive officer, met privately with some of the city’s premier money managers.
It was the second stop in a nationwide “roadshow’’ ahead of the social network’s initial public offering, when it will sell shares on public markets for the first time. The company could begin trading as early as May 18, and is expected to raise up to $11 billion in the biggest-ever stock launch for a technology company. Last week, it set a $28-to-$35 price range for its shares.
Zuckerberg skipped Tuesday’s main presentation of the roadshow, an hourlong question-and-answer session held over breakfast at the Four Seasons Hotel, but he did attend local meetings with larger potential buyers of Facebook stock, including Fidelity Investments and Wellington Management, according to people briefed on the meetings but not authorized to discuss them. A small group of Facebook executives also met with BlackRock Inc. The investment firms and Facebook declined to discuss the meetings.
Fidelity is already a significant investor in Facebook, and stands to profit handsomely when the company goes public. About two dozen of Fidelity’s investment funds own a combined stake in Facebook worth at least $300 million, according to Fidelity Insight, a Wellesley firm that tracks Fidelity funds.
The invitation-only morning meeting at the Four Seasons, led by Facebook chief operating officer Sheryl Sandberg and chief financial officer David Ebersman, drew about 200 investment bankers and potential investors eager to hear how the eight-year-old social network will continue growing its user base and ad revenue. The vast majority of the company’s $3.7 billion in 2011 revenues came from ads placed on Web pages.
Investors also asked about Facebook’s efforts to adapt to the rising use of mobile devices like smartphones to access social media, and how the company can compete against search giant Google Inc., which also makes money from placing online ads, according to several attendees as they left the meeting.
Zuckerberg’s absence from the crowded presentation disappointed many in Boston, particularly since he had attended the New York meeting on the previous day, showing up in his trademark hoodie sweatshirt. Many of the investors who gathered early Tuesday morning amid tight hotel security had hoped to see Zuckerberg, who famously cofounded Facebook in a Harvard University dorm room in 2004, then dropped out to run the company in Silicon Valley.
In Boston, Facebook dropped a video component of its roadshow that was criticized for taking up too much of the New York presentation on Monday. Leaving it out left more time for questions during Tuesday’s meeting.
The appearance in Boston did not satisfy some reluctant potential investors. Michael Mullaney, chief investment officer at Fiduciary Trust Company, a private wealth-management firm in Boston, questioned the company’s stated valuation of $95 billion. That seemed high, he said, even for a company that claims 900 million users and 500 million daily visitors to its website.
“Those are pretty remarkable numbers, but the question is, how do you monetize that?’’ asked Mullaney. “It’s a little bit of a leap of faith [to believe] that they can grow into their valuation.’’
Doubts or no doubts, Mullaney said, he has clients who will still want to buy into the Facebook offering, the most anticipated from a technology company since Google went public in 2004 and raised $1.9 billion.
Some of the same questions raised about the Mountain View, Calif.-based Google then are being raised about Facebook now, said Paul Deninger, senior managing director at Evercore Partners, an independent investment advisory firm in Waltham.
Google, which is today valued at $200 billion, may be a smarter buy for investors than Facebook despite the hype of the moment, according to Deninger, who did not attend the Facebook presentation in Boston. “If I had a choice between buying Google today or Facebook at the IPO price, I might be inclined to buy Google,’’ he said, noting that Google’s ratio of share price to earnings, a key metric for investors, is much lower than Facebook’s.
“In Google, you’ve got a tested company with strong growth and profits,’’ he said.
Facebook has the rest of its roadshow to persuade investors to buy. It is expected to make a repeat stop in New York, along with meetings in Chicago and Menlo Park, Calif., where the company is based, before hitting the open market.
Michael B. Farrell can be reached at email@example.com.