NEW YORK/SAN FRANCISCO (Reuters) - Facebook Inc priced its initial public offering at the top of its target range to raise more than $16 billion, as strong demand, particularly from retail investors, fuels anticipation of a big pop in the stock when it begins trading Friday on the Nasdaq.
Predictions of how much the stock will rise on its first day of trade vary greatly -- some experts said the high IPO price and increased float could limit gains to 10 percent to 20 percent, while others said anything short of a 50 percent jump would be disappointing given the hype.
"I think anything over 50 percent will be considered a successful offering -- anything under that would be underwhelming," said Jim Krapfel, analyst at Morningstar. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first day pop."
Facebook is selling a 15 percent stake priced at $38 a share, giving the world's largest online social network a valuation of $104 billion.
That puts the eight-year-old company, founded in a Harvard dorm room by Chief Executive Mark Zuckerberg, a valuation akin to that of Amazon.com Inc and exceeding that of Hewlett-Packard Co and Dell Inc combined.
In an event that many say is as much a cultural phenomenon as it is a business story, Facebook will make its Wall Street debut at around 11 a.m. on Friday on the Nasdaq.
Investor enthusiasm for Facebook shares comes despite questions about the company's long-term money-making capabilities, particularly after it reported a quarter-to-quarter revenue slide in April.
"Hundreds of millions of people are extremely passionate about this product. A lot of those people want to be a part of this event, of this company that they have an affinity for. That's creating a level of excitement for the stock that you don't normally see," said Steve Weinstein, an analyst with ITG Research.
Facebook, with some 900 million users, raised the target IPO price range on Tuesday to between $34 and $38 per share, from between $28 and $35. More than half of the proceeds of the offering will go to existing shareholders, including early backers such as Accel Partners and Russia's DST Global.
Facebook could raise north of $18.4 billion if a greenshoe option for underwriters is exercised, making the IPO the second-largest in U.S. history, after that of Visa Inc.
Some investors expected Facebook to price the offering at $40 per share. However, the Nasdaq Composite Index fell by more than 2 percent on Thursday, quelling such speculation.
"It probably would have gone at $40 if the market was not horrible," said Scott Sweet of research firm IPO Boutique. "I expect it to open at a nice premium, but I don't expect a LinkedIn-type performance because of the sheer size of this IPO. They have to move a lot of stock and there will be a lot of selling."
Shares of professional networking company LinkedIn Corp doubled on their first day of trading.
Lee Simmons, industry specialist at Dun & Bradstreet, forecast a 10 percent to 20 percent gain for Facebook on Friday.
"You've got a large offering at an increased price, so a huge pop may be difficult to achieve," Simmons said. "When you're talking about doubling or a pop the size of LinkedIn, it's more difficult to achieve because Facebook is just offering more shares ... The others were smaller floats, under 10 percent, so you had this artificial feeding frenzy."
On Wednesday, Facebook increased the size of the IPO by almost 25 percent to 421 million shares, a 15 percent float. The greenshoe, if exercised as expected, would expand the float to 18 percent.
Another social media company, Zynga Inc, an online games developer that makes lots of games for Facebook users, fizzled in its debut and ended down 5 percent on its first day of trading. No one Reuters spoke with said Facebook's stock would fall on Friday.
Facebook will celebrate its Wall Street debut with an all-night "hackathon" at its Menlo Park, California, headquarters starting on Thursday evening, a company tradition in which computer programmers work on side projects that sometimes turn into mainstream offerings.
Despite the high expectations, Facebook faces challenges maintaining its growth momentum.
Some investors worry the company has not yet figured out a way to make money from the growing number of users who access Facebook on mobile devices such as tablets and smartphones. Meanwhile, revenue growth from Facebook's online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.
Would-be investors have been warned by some financial advisers against jumping into Facebook right away, but the well-known brand could still attract enough interest to exceed the 458 million shares traded the day General Motors went public after emerging from bankruptcy in 2010.
One UBS adviser initially received calls from 12 clients clamoring to buy shares of Facebook, but over the past couple of weeks, two have changed their minds.
"A lot of people are thrown off by the recent negative stories in the press," the adviser said, speaking on condition of anonymity. "One guy was worried about General Motors stopping its advertising on Facebook."
GM said on Tuesday it would stop placing ads on Facebook, raising questions about whether the display ads on the site are as effective in reaching consumers as traditional media.
Overall, financial advisers are struggling to manage clients' expectations about what the stock will do and in some cases, if they will be able to get any stock for them.
"People want to just own it because they think it's the next Google and they missed out on that," said a financial adviser from Wells Fargo Advisors, the brokerage division of Wells Fargo & Co, which is part of the syndicate underwriting the deal.
Facebook has 33 underwriters for the IPO, led by Morgan Stanley, JPMorgan and Goldman Sachs.
Additional reporting by Jessica Toonkel and David Gaffen in New York, Alexei Oreskovic and Edwin Chan in San Francisco; Editing by Tiffany Wu, Phil Berlowitz and Steve Orlofsky