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Was the Facebook Deal Overhyped? (0.6% Gain)
CNBC ^ | 05-18-2012 | By: Kate Kelly, Kayla Tausche

Posted on 05/18/2012 1:18:23 PM PDT by Red Badger

With Facebook shares trading close to their $38 offer price and revelations that retail investors got a larger-than-expected slice of the $18.4 billion IPO, market watchers are questioning whether the social network’s debut was overhyped — not just in the media, but in the investor community.

Buy-side anticipation of a huge Day One price pop was high, and yet as of lunch time on Friday, Facebook shares hadn’t crested $45.

Experienced bankers say that with a new issue of this size, moving the shares beyond the single-digit percentage range can be tough, and that Morgan Stanley [MS 13.35 -0.11 (-0.82%) ], the lead bookrunner on the deal, has done an admirable job at keeping the stock trading in relatively stable condition.

GM [GM 21.18 -0.43 (-1.99%) ], for instance, which was an $18.1 billion IPO, only traded a few percentage points above its new issue price on its first day of trading late in 2010. Prior to the first day of trading, bankers said they didn’t expect a more than 10% upsurge on day one, given the deal’s size.

However, with anecdotal reports that some institutional investors got more shares than they were expecting, and new revelations that, according to two people close to the matter, the retail allocation of Facebook IPO shares was more than 20 percent, marking an all-time high for a new issue, some market participants are wondering whether the investor excitement toward the deal was overplayed earlier this week.

(Excerpt) Read more at cnbc.com ...


TOPICS: Business/Economy; Culture/Society; US: New York
KEYWORDS: facebook; ipo
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1 posted on 05/18/2012 1:18:29 PM PDT by Red Badger
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To: Red Badger

Is it wrong that I want it to plummet on Monday?


2 posted on 05/18/2012 1:20:54 PM PDT by EEGator
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To: EEGator

“Wrong” is a strong word, “unkind” might be more appropriate. :)


3 posted on 05/18/2012 1:23:26 PM PDT by Sudetenland (Anybody but Obama!!!!)
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To: EEGator

All those insiders needed someone to sell to today...


4 posted on 05/18/2012 1:23:29 PM PDT by AngelesCrestHighway
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To: Red Badger

Shades of the dot-com bubble!


5 posted on 05/18/2012 1:24:45 PM PDT by skr (May God confound the enemy)
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To: EEGator

Monday moring will be very interesting for FB...


6 posted on 05/18/2012 1:24:53 PM PDT by AngelesCrestHighway
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To: Red Badger

0.6% per day x 250 trading days per year = 150% per year.


7 posted on 05/18/2012 1:25:09 PM PDT by E. Pluribus Unum (Do I really need a sarcasm tag? Seriously? You're that dense?)
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To: Red Badger

How the hell does Facebook make that kind of money?????


8 posted on 05/18/2012 1:27:09 PM PDT by New Jersey Realist (America: home of the free because of the brave)
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To: Red Badger

Traders in a down economy are not hopping on this band wagon as would have years past, then what do I know.


9 posted on 05/18/2012 1:30:22 PM PDT by boomop1
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To: Red Badger

The Facebook IPO was way over-hyped. It was even over-hyped by several shows onFox Business Channel that focused on how over-hyped it was.


10 posted on 05/18/2012 1:30:43 PM PDT by henkster (Wanted: Politicians willing to say "No" to people. No experience required.)
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To: New Jersey Realist

Ads ? No Ads so sad


11 posted on 05/18/2012 1:31:17 PM PDT by molson209
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To: E. Pluribus Unum; EEGator

After today’s poor showing, I’d expect Monday to be a sell at the bell...........


12 posted on 05/18/2012 1:31:29 PM PDT by Red Badger (Think logically. Act normally.................)
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To: AngelesCrestHighway

Exactly. Everybody bought at the bell, computerized trades, then waited for the pop-up price that never went anywhere. They were expecting it to double in and hour............


13 posted on 05/18/2012 1:33:40 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Red Badger

Not so much hype as obsession. I say BFD. If it goes up, it goes up. If it goes down, it goes down.

It is what it is. Anyone who invests more than they can afford to lose is a fool or very lucky.


14 posted on 05/18/2012 1:33:52 PM PDT by Larry Lucido
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To: New Jersey Realist

Ads and eyeballs............


15 posted on 05/18/2012 1:34:43 PM PDT by Red Badger (Think logically. Act normally.................)
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To: E. Pluribus Unum

Underwriters bought Facebook’s stock to keep it from falling below the IPO price ?


16 posted on 05/18/2012 1:38:10 PM PDT by molson209
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To: Red Badger

It’s the karma of being associated with Obama.


17 posted on 05/18/2012 1:38:10 PM PDT by EEGator
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To: Red Badger

If so, we’ll buy more.

We didn’t buy very many shares today. But I think there will be steady FB use and thus a steady increase to the shareholders.

We bought today not looking for a quick buck, but because we think the business will remain profitable.


18 posted on 05/18/2012 1:38:25 PM PDT by Jemian
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To: Red Badger

BUT FOR, the underwriters, FB would have tanked today.

Too many shares and way overpriced.


19 posted on 05/18/2012 1:40:00 PM PDT by onyx (SUPPORT FREE REPUBLIC, DONATE MONTHLY. If you want on Sarah Palin's Ping List, let me know.)
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To: AngelesCrestHighway

It’s only VHT activity in the markets ,, no retail customers ... don’t know how long they can pretend..


20 posted on 05/18/2012 1:42:06 PM PDT by Neidermeyer
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To: Jemian

Warren Buffet said he could not value the company, therefore he would not buy the stock, Berkshire-Hathaway, that is..........


21 posted on 05/18/2012 1:42:56 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Red Badger

Actually I think that means it was right on target. People had expectations it would go psycho up, but that’s .com thinking, that’s two booms ago. In normal times when an IPO stays at about the price they opened at that means that the folks who set the open price got it right, you don’t normally expect them to triple in price in 2 hours like in the 90s, that was crazy time.


22 posted on 05/18/2012 1:43:31 PM PDT by discostu (I did it 35 minutes ago)
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To: New Jersey Realist

Selling YOUR personal information; not on ads.


23 posted on 05/18/2012 1:47:44 PM PDT by carriage_hill (All liberals & most demoncraps think that life is just a sponge bath, with a happy ending.)
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To: Red Badger

Facebook is going to have a problem as it really doesn’t sell anything. People comparing it to Ebay, Microsoft or Cracker Barrel fail to see one very important ingredient.


24 posted on 05/18/2012 1:48:36 PM PDT by eyedigress ((zOld storm chaser from the west)/?)
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To: New Jersey Realist

How the hell does Facebook make that kind of money?????——

Obama stash


25 posted on 05/18/2012 1:49:46 PM PDT by Freddd (No PA Engineers)
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To: discostu

As Onyx posted, the underwriters had to step in to support the initial offering price of $38, or it would have tanked. Not a good sign. The $38 price was considered ‘conservative’ yesterday. By Monday it may be considered ‘speculative’.

How can anybody invest in a corporation that has no real product or service to sell, and is basically valued as the sum total of its parts, i.e., servers/real estate/office furniture? It may be a fad that people get tired of in a couple of years..........


26 posted on 05/18/2012 1:55:01 PM PDT by Red Badger (Think logically. Act normally.................)
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To: eyedigress

It may be a fad the passes thru the populace like the hula-hoop, stacked heels and mood rings...........


27 posted on 05/18/2012 1:56:32 PM PDT by Red Badger (Think logically. Act normally.................)
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To: discostu
Actually I think that means it was right on target.

I agree. If demand was such that the stock would have closed today at $100/share (for example) then Zuckerberg and his partners would have lost the opportunity to get that price for their shares, rather than the $38 IPO price they did get. Of course, that would have thrilled the speculators who bought it at the IPO price. Conversely, if the IPO price had been significantly higher than the collective buyers and sellers had thought it was worth, the price could have fallen well below the $38 level. Zuckerberg, et al, would have been thrilled to get top dollar for their privately held shares, but those who bought at the IPO price and took losses would be less than thrilled.

Of course, the underwriters might be long some stock now in an effort to keep that last scenario from happening. If they are supporting a stock whose value they misjudged, they could eat some heavy losses. It's called capitalism.

28 posted on 05/18/2012 1:59:50 PM PDT by TruthShallSetYouFree (Don't let Julia fool ya. Socialism doesn't work.)
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To: Red Badger

Yes.
Next question.


29 posted on 05/18/2012 2:03:10 PM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: eyedigress

So the question hangs in the air. How does FB make moeny? There are no adds so it sells information it mines about the subscribers? It seems that would not last that long nor be that valuable or profitable.

I suppose I’m just too ignorant.


30 posted on 05/18/2012 2:03:18 PM PDT by Sequoyah101
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To: AngelesCrestHighway

Seems to me this all follows the LFABFTM pattern....

Looking for a Bigger Fool Than Me

I think they found it.


31 posted on 05/18/2012 2:04:12 PM PDT by Sequoyah101
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To: Red Badger

So it was valued correctly. What’s the problem?


32 posted on 05/18/2012 2:05:05 PM PDT by ctdonath2 (Cloud storage? Dropbox rocks! Sign up at http://db.tt/nQqWGd3 for 2GB free (and I get more too).)
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To: Red Badger

A contrarian view:

A stock that trades sideways is priced right.
A stock that is trading up, is under priced till it trades sideways.
A stock that is trading down, is over priced till it trades sideways.


33 posted on 05/18/2012 2:06:36 PM PDT by taxcontrol
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To: Red Badger; Sequoyah101

There was more hype on this IPO than anything I have ever seen. Corporate investors made 2-3 bucks a share by 1400 then bailed. If the little guy thinks this was his big chance, he was right. Your big chance to lose your ass.


34 posted on 05/18/2012 2:08:46 PM PDT by eyedigress ((zOld storm chaser from the west)/?)
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To: ctdonath2; taxcontrol

Had it not been for the underwriters stepping in to support the price, it would have gone down...........not sideways......


35 posted on 05/18/2012 2:10:28 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Red Badger

Well that’s a fine conspiracy theory but I deal only in facts. And the facts are that IPOs are SUPPOSED to stay relatively close to the initial set price.

As for “no real product or service” that’s like 90% of the companies we have. Anybody that’s ad supported, meaning almost all the internet companies and most of the entertainment industry, are the same. There’s lots of stuff that may be a fad.


36 posted on 05/18/2012 2:11:55 PM PDT by discostu (I did it 35 minutes ago)
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To: Red Badger
Grossly over-hyped, IMO.
37 posted on 05/18/2012 2:14:16 PM PDT by Mister Da (The mark of a wise man is not what he knows, but what he knows he doesn't know!)
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To: Red Badger

Then the underwriters have a value proposition that makes the position attractive to them. Therefore, the stock is
“worth” what they are willing to pay for it.

I’m sure that there were some individuals in this whole IPO who bought the stock for the sole reason that it was Facebook’s IPO and they just wanted to say they got into the deal. Is their desire to own the stock any more hype than the portfolio manager who buys more stock to protect a larger investment?


38 posted on 05/18/2012 2:16:05 PM PDT by taxcontrol
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To: discostu

The business world is littered with the corpses of .com companies that went bust...........only a very few have actually made a go of it. I can’t see FB being a good long term investment. If someone who bought it didn’t make any money on it today, they probably won’t............


39 posted on 05/18/2012 2:19:10 PM PDT by Red Badger (Think logically. Act normally.................)
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To: taxcontrol

There’s a fine line between ‘investing’ and ‘gambling’. Those who cross it are usually not happy once they have done so..........


40 posted on 05/18/2012 2:21:39 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Red Badger

The business world is littered with corpses period. 4 out of 5 non-restaurant businesses go under in the first 5 years (restaurants it’s even worse).

FB has 900 MILLION users world wide. 3 entire Americas. Even if they do start to falter it’ll take a long time for that to unwind. They’re at least a good midterm investment. Between advertising and game cash they actually get a pretty decent chunk of change per user. They have at least as good a revenue stream as google did when they IPOed.


41 posted on 05/18/2012 2:23:25 PM PDT by discostu (I did it 35 minutes ago)
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To: discostu

They’ve never gotten a penny from me. Now they may have sold my personal info, but that’s a whole ‘nother story.....


42 posted on 05/18/2012 2:31:02 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Red Badger

So? The list of companies I’ve never given any money to that still make money because of me is epic and huge. FB, Google, Yahoo, various radio stations. That’s the way ad revenue industries work. Doesn’t mean there’s anything wrong with the business. Yeah because of the game cash FB CAN make money from the users, but even people who don’t play the games generate ad hits. It’s not a new concept, some of the biggest entertainment empires in the world (America’s broadcast TV networks) were built on this and while it’s not working too well for them anymore there’s still plenty of companies making plenty of cash by selling other people’s eyeballs.


43 posted on 05/18/2012 2:41:31 PM PDT by discostu (I did it 35 minutes ago)
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To: New Jersey Realist

“How the hell does Facebook make that kind of money?????”

Advertising...until advertisers figure out that Facebook ads are inneffective.


44 posted on 05/18/2012 3:07:10 PM PDT by lacrew (Mr. Soetoro, we regret to inform you that your race card is over the credit limit.)
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To: lacrew

I don’t know, I imagine that Facebook ads could be very effective if you have the right product. A lot of young people are addicted to shopping on line.


45 posted on 05/18/2012 3:09:22 PM PDT by Eva
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To: Red Badger

The same could have been said of google at the time it hit the market, or yahoo. The problem was that people got almost all they asked for in the ipo which rarely occurs. So people or institutions who placed orders of 500,000 shares expecting only to get 100,000 shares actually got the full amount. The problem then is that they dont actually have the capital required to make the transactions so they had to sell right away, which basically was like a barrier not allowing it to go up. Iactually think next week will look much better since it was able to survive all the mass sellings from people who couldnt afford what orders were placed. Im an engineer tho, what do i know...


46 posted on 05/18/2012 3:56:19 PM PDT by hannibaal
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To: Red Badger

Sounds to me like they priced it exactly right. The company reaped all the money from the offering - that’s the idea.


47 posted on 05/18/2012 4:01:28 PM PDT by glorgau
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To: Red Badger
Actually, the .06% gain is erroneous. 400 million shares traded in the first four minutes at what appear to be $42 per share. The remaining 200 million sold for less than that. Therefore, most traders lost money.
48 posted on 05/18/2012 4:47:16 PM PDT by norwaypinesavage (Galileo: In science, the authority of a thousand is not worth the humble reasoning of one individual)
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To: Red Badger

You can buy 10,000 likes on your facebook page for $200. See the scam, you bloody morons.


49 posted on 05/18/2012 4:49:44 PM PDT by sergeantdave
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To: Red Badger
However, with anecdotal reports that some institutional investors got more shares than they were expecting...I watched the rollout this morning on CNBC - delayed for one-half hour - supposed to start trading at 11:00AM, then 11:05, then 11:15, and finally hit the road at !!:30 with some sort of behind the scenes plays going on - rumor was that big players usually ask for 50% more shares than they really want on an IPO because they usally can't get all the ask for - but FB was providing all everyone was requesting, so at the last minute many traders were trying to return shares which they knew they couldn't sell - LOL as they say......
50 posted on 05/18/2012 5:41:18 PM PDT by Intolerant in NJ
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