Facebook prices its IPO at $38 ahead of Friday's trading

SAN FRANCISCO -- Facebook is about to burst out of the IPO gate Friday, with a blistering initial public offering that is expected to raise billions — not to mention the eyebrows of some investors on Wall Street.

Priced at $38 a share on Thursday, the 8-year-old social-networking company, fronted by hoodie-wearing CEO Mark Zuckerberg, could raise $16 billion in funding, not including an overallotment option. It could end its first day of trading worth up to $104 billion. That would make it worth more than Disney, Ford and Kraft Foods. It would be the second-largest U.S.-listed IPO behind only Visa. Facebook's market debut, the biggest tech company IPO ever, should create 1,000 millionaires overnight.

The mega-offering signals a seminal event in the Internet's maturation as a fundamental cog in the world economy, says Dave Morin, CEO of Path, a social network of 3 million and a former Facebook executive. "It sets the tone for long-term, product-driven Internet companies," he says.

"This is an IPO with enormous impact," says Charlene Li, founder of market researcher Altimeter Group. "No one will touch Facebook in its market for the next few years."

Froth over Facebook's first day of trading on Nasdaq has become a national obsession, sparking debate over Zuckerberg's hoodie, the scope of the social network's influence on American culture and the Internet, and what it all means to a sputtering U.S. economy. Facebook's IPO dwarfs that of Google, which raised $1.7 billion in 2004, but the comparison ends there. Google's revenue then was $3.2 billion and soaring while Facebook's already show signs of cooling off.

Scrutiny will be intense

Going public means Facebook sacrifices some financial flexibility and will raise questions about its financial bona fides, says Nancy Miller, author of The Facebook IPO Primer. It faces "intense scrutiny from shareholders," Miller says.

Concern about that issue was underscored in a letter Zuckerberg wrote in the company's registration statement, in which he vowed to continue to operate Facebook as if it were a private company.

"Simply put: We don't build services to make money; we make money to build better services," wrote Zuckerberg, who controls 55.8% of company stock voting rights.

Not that Zuckerberg is indifferent to the wants and needs of investors. Despite reports that he would nix participating in the road show to drum up support for the IPO, Zuckerberg participated.

One of the topics undoubtedly broached is how Facebook intends to ramp up revenue to meet the heightened expectations of investors and analysts in the months — and years — to come. Speculation has centered on Facebook introducing search functions and an ad network for third-party sites.

It may have no choice but to speed up an already-aggressive product timetable to diversify revenue and satisfy shareholders in the coming months. That's because its biggest source, ads, has dipped. Last month, it reported first-quarter ad revenue was $872 million, down 7.5% from the previous quarter. It blamed "seasonal trends" and shifting user growth for the decline.

Longer-term concerns?

Facebook is under mounting pressure from Wall Street to unearth new revenue to reduce its reliance on advertising, which accounted for 85% of its revenue last year.