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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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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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