Facebook is going to raise $5B. However, all the aspiring investors will pay a steep excess to the initial share price. So people would be MORE THAN HAPPY to pay twice the initial share price. So why can't Facebook profit on this?
- Instead of issuing /shares and 100,000,000 (B in market cap), why can't they issue only 50,000,000 @ 0/shares, and thus sell LESS OF THE COMPANY FOR the same amount of money? This would benefit Mark Zuckerberg twice as much.
If you were selling 50% of your fantastically successful business. Wouldn't you sell it at a steep premium? Say 10X annual revenues, since your goal is to maximize earnings. An auctioneer or a seller who doesn't sell a business for what it's worth has failed, so I don't see why the I-Bankers would sell it so cheaply knowing that this stock will double in price in 10 days.
The only downside is to investors who purchase the richly-priced shares. Their ROR would be 10% over 10 years, and not 17.9% ROR.