News Update :

Facebook IPO: early history falls flat, end day of action at $ 38.2

Saturday, May 19, 2012


"The underwriters got greedy on behalf of selling shareholders and hit the price high enough that they do not have much of a bump on the first day," said Bill Smead, Chief Investment Officer at Smead Capital Management, which did not buy shares in Facebook IPO.


The historic initial public offering of Facebook is not going as planned on Friday, the sky-high society social networking development combined with business problems left the stock languishing near its offer price at market close .

Facebook share began trading in late morning Friday and opened 11 percent above the offering price of $ 38, but after peaking at about $ 45 slipped rapidly at the end of the day to close at 38, $ 23. The IPO was the third largest in the history of the United States and valued Facebook to eight years to 104 billion.

The first is surprisingly low for a stock that analysts had predicted rise between 10 and 50 percent is not likely to dent the business prospects of Facebook, which claims 900 million users and is disrupting business practices and social relations worldwide.

But unexpected developments was a marked decline in Morgan Stanley, the leader in the business, which sources said was forced to defend the price level of $ 38 by purchasing shares on the open market. Many market players have said they expected the stock to remain under pressure next week.

The offer has also proved an embarrassment for the NASDAQ: the opening was delayed by the exchange struggled with a huge volume of orders, and for much of the day, there were long delays in the confirmation of order. The SEC said Friday it was reviewing the situation.

Social media companies and Internet companies that had hoped to benefit from a halo effect Facebook has instead been dampened Friday, with the giant Zynga Social Gaming is nearly 15 percent.

Analysts say Facebook may have just reached too to raise the price range of introductory pricing at the top of the range and increasing the size of the offer earlier in the week.

"The underwriters got greedy on behalf of selling shareholders and hit the price high enough that they do not have much of a bump on the first day," said Bill Smead, Chief Investment Officer at Smead Capital Management, which did not buy shares in Facebook IPO. "They increased the size of the transaction and who really did a number on it."

Skeptics have argued all along that an evaluation of over 100 billion - roughly equivalent to Amazon.com Inc. and superior to that of Hewlett-Packard Co and Dell combined - was much too high for a company that posted $ 1 billion and profits of 3.7 million dollars in revenue in 2011.

Concerns about the potential gains of Facebook were highlighted by the announcement this week that General Motors would no longer buy paid advertising on Facebook.

"You do not need more than a little pencil and a towel to make an assessment about it, to say that there are heroic assumptions in earnings growth to keep this $ 100 billion, much less $ 115 000 000 000 or $ 120 billion, "said Dave Rolfe, fund manager at River Park Fund Wedgewood, who own shares in Facebook.

"I know there are a lot of excitement and exuberance, but now it appears that the market is beginning to make some hard assessment calculations from the beginning."

Opening day of Facebook on Wall Street does not bode well for the performance of the stock in the days ahead, said Channing Smith, portfolio manager at Capital Growth Advisors, who own shares in Facebook.

"If you're an investment banker or if you are long the stock, I would definitely a little worried as we move away from this weekend," he said.

The IPO may also weak give pause to private investors in Silicon Valley that have been invested money in companies next generation Internet at very high valuations in the hope of eventually take to make them public.

The media circus

Facebook Headquarters in Silicon Valley, the day began with company founder and CEO Mark Zuckerberg, 28, symbolically ringing the opening bell for stock trading on Friday morning.

Wearing his trademark black hoodie, Zuckerberg, whose shares are worth almost $ 20 billion and retains voting control over society, in his arms and high fived Sheryl Sandberg, Facebook Director Chief Operating Officer, who is credited discipline of business crucial to a company founded in a Harvard dorm room.

The area outside the Facebook offices was packed with photographers, more than a dozen television trucks and a helicopter hovering overhead television news.

Outside the headquarters of Nasdaq in New York, the crowd also gathered, even as officials of hard currency to settle trade problems for investors to guess whether their purchase and sale orders were actually executed.

The IPO will hit thousands of paper millionaires among the new Facebook employees 3,500 - and a handful of billionaires among its founders and early investors. More than half of the proceeds from the IPO will go to existing shareholders, including donors such as the beginning of Accel Partners and DST Global Russia.

In anticipation of the IPO, institutional investor demand was strong, and many analysts had expected an influx of retail investors who want to own a slice of a cultural phenomenon, regardless of price. But this does not happen.

"Flippers who waited all day for a pop that came not decided to throw in the towel and leave," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"This group also includes people who overextended themselves to get more stock than they can afford to take -. If they got the union or on the open market once it has open around noon "

Yet from the perspective of Facebook, the dividend yield can be taken to reflect smart pricing: Zuckerberg and early investors cashed up and left little easy money on the table.

"You want to price the offer correctly. Institutional Buyers get a small bump and the company raises the right amount of money," said Kevin Hartz, co-founder and CEO of Eventbrite, a start-up ticketing line that is built into the Facebook platform. "If the stock has a huge bump on the first day, it means that you misread the market demand and the company could have raised more money with the same amount of dilution, or could have raised the same amount of money with less dilution. "

BATTLE OF THE GIANTS

Facebook faces many challenges as he takes his place beside Google, Apple and Amazon as one of the giant public defining the next generation Internet economy. Google, Facebook in particular seen as a mortal threat and is moving aggressively to integrate social networking features through its products.

Meanwhile, dozens of young companies are building new products and services, in some cases above the Facebook platform and in some cases, compete with it, and attracting huge amounts of capital investment.

A handful of these so-called Web 2.0 companies, including Zynga, LinkedIn Corp., Yelp and Groupon have already gone public, and others have been acquired by industry giants. All these stocks fell on Friday in sympathy with Facebook lower than expected debut.

In an indication of the land grab underway in the world of the Internet, Facebook in April spent $ 1 billion to acquire Instagram, a small company of sharing photos with a lot of users but no revenue. A rival Facebook, the site of social Pinterest scrap-booking, raised money earlier this week an assessment of $ 1.5 billion in a sign that investors and other private investors still see enormous potential in Web 2.0 companies.

Many Facebook users spend hours a day on the site and share vast amounts of personal information. This in turn allows Facebook to target its advertising to the interests of specific populations, and many analysts believe the vast store of personal information that gives an advantage Facebook Google and others may not.

"Literally everything you see on the internet, you've seen on Facebook - but done with much of the social graph built into it," said Siva Kumar, CEO of e-commerce TheFind. "D In a way, they operate the mall, and everyone in the mall will pay one way or the other to Facebook. "

Analysts say the company has vast untapped potential in mobile computing, where it has been low to date, and potentially in other Internet services like e-mail and research. Zuckerberg, but unproven as a public company CEO, is widely admired as a visionary product that did a masterful job to continually improve the Facebook experience.

Skeptics, however, note that only a small percentage of Facebook users respond to advertising on the site. Google keeps a great advantage in this regard, because the Internet search advertising is specific in nature much more relevant and therefore more valuable.

In Silicon Valley, however, the conventional wisdom is that Facebook and its brethren will force social media more and more important in the business for many years to come.

And no matter how the industry dynamics are taking place in the long term, the influx of wealth resulting from the extraordinary growth of Facebook has helped drive a mini boom in San Francisco Bay Area real estate. Income tax relating to the IPO will reduce the state budget deficit in California by an estimated $ 2 billion.
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