Facebook (FB) Announces Follow-On Offering

NEW YORK (TheStreet) -- Facebook (FB) Thursday announced a follow-on offering of 70 million shares of Class A common stock.

The offering includes 41.3 million shares sold by CEO Mark Zuckerberg, and 27 million share offered by the social network company. Zuckerberg is selling part of his stock to pay a tax bill from a stock option purchase of Class B shares of his company.

Facebook will use the money generated by the offering "for working capital and other general corporate purposes," according to a company news release.

The follow-up offering comes just one day before Facebook is set to join the S&P 500.

Shares of Facebook fell 1.3% to $54.83 on Thursday.

TheStreet Ratings team rates FACEBOOK INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about its recommendation:

"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed, with some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FB's very impressive revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenue leaped by 59.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although FB's debt-to-equity ratio of 0.04 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 10.37, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 950.00% and other important driving factors, this stock has surged by 87.92% over the past year, outperforming the rise in the S&P 500 index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level that is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • When compared to other companies in the Internet Software & Services industry and the overall market, FACEBOOK INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: FB Ratings Report

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