Facebook Inc.'s initial public offering has so far generatedlower-than-expected demand from institutional investors who areconcerned about the company's growth prospects, people withknowledge of the matter said.

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Some investors expressed reluctance after Facebook said on May 9that advertising growth hasn't kept pace with the increase inusers, said the people, who asked not to be identified because theprocess is private. Facebook is also telling analysts that salesmay not meet their most optimistic projections, two peoplesaid.

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Facebook executives have another week to market the IPO, set toprice May 17, and underwriters are stepping up efforts to drum upinterest from large shareholders, one person said. The top end ofthe price range values the world's most popular social network at$96 billion, or more than Standard & Poor's 500 Index membersincluding Walt Disney Co. and Visa Inc.

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“It's overvalued at that price,” said Filippo Garbarino, whooversees $50 million at Frontwave Capital Ltd. in Chiasso,Switzerland. “Investors are becoming more selective and there arequite a few fallen angels around, like Netflix. Those who buyFacebook at these levels are more speculators than investors.”

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Lackluster interest from institutional investors at this stagecould compel the company to rely more on buying from retailinvestors, whose demand remains robust, people said. The companymay still elicit enough demand to sell shares at or above the highend of a projected range, people said. Institutional investors tendto hold shares longer than retail investors, lessening a stock'svolatility.

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Facebook, led by Chief Executive Officer Mark Zuckerberg, plansto raise as much as $11.8 billion through the IPO, the biggest inhistory for an Internet company. Underscoring concerns that growthmay taper, 79 percent of respondents in the Bloomberg Global Pollof 1,253 investors, analysts and traders who are Bloombergsubscribers said Menlo Park, California-based Facebook doesn'tdeserve the top-end valuation.

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“Expectations on Facebook are way too high,” said MitsuoShimizu, a market analyst at Tokyo-based Iwai Cosmo Securities Co.“Given its fundamentals, the company doesn't look anywhere cheap invaluation.”

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Slackening Growth

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Facebook is offering 337.4 million shares at $28 to $35 each.The shares will be listed on the Nasdaq Stock Market under thesymbol FB. Morgan Stanley, JPMorgan Chase & Co. and GoldmanSachs Group Inc. are leading the sale.

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The company plans to sell 180 million shares, while existingowners such as Accel Partners, Goldman Sachs and Digital SkyTechnologies are offering 157.4 million shares. Zuckerberg isoffering 30.2 million of his 533.8 million shares, and may control57.3 percent of the voting power of Facebook's capital stockoutstanding after the offering, regulatory filings show.

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Jonathan Thaw, a spokesman for Facebook, didn't respond to arequest for comment.

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Facebook, co-founded by Zuckerberg in 2004 in a HarvardUniversity dorm room, seeks a valuation at 24 times revenue,compared with 5 times for Google Inc., according to data compiledby Bloomberg.

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Already the company's growth has shown signs of slackening.Sales climbed 88 percent to $3.71 billion last year. According toresearcher EMarketer Inc., revenue may increase 64 percent to $6.1billion this year. That would be the third straight year of slowinggrowth.

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Bloomberg News

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