Facebook prices at top of range in landmark IPO
NEW YORK, May 18 — Facebook priced its initial public offering at US$38 a share, giving the world’s No. 1 online social network a US$104 billion (RM323.1 billion) valuation in the third largest offering in US history.
The offering gives the eight-year-old company, founded in a Harvard dorm room and now with 900 million users, a valuation akin to that of Amazon.com, and exceeding that of Hewlett-Packard and Dell combined.
Predictions on how much the stock will rise on the first day of trading vary greatly, with some experts saying anything short of a 50 per cent jump would be disappointing. Other IPO watchers say the large size of the float, coupled with a raised price range, could reduce first-day gains to as little as 10 per cent.
“I think anything over 50 per cent will be considered a successful offering — anything under that would be underwhelming,” said Jim Krapfel, analyst at Morningstar. “A lot of retail investors are not concerned about valuation. That’s what is going to drive the first day pop.”
Lee Simmons, industry specialist at Dun & Bradstreet, had a more modest forecast.
“You’ve got a large offering at an increased price, so a huge pop may be difficult to achieve. I’d think a 10 to 20 per cent pop over the offer price is expected,” Simmons said.
“When you’re talking about doubling or a pop the size of LinkedIn, it’s more difficult to achieve because Facebook is just offering more shares ... The others were smaller floats, under 10 per cent, so you had this artificial feeding frenzy.”
Shares of professional networking company LinkedIn doubled on their first day of trading.
On Wednesday, Facebook increased the size of the IPO by almost 25 per cent to 421 million shares, a 15 per cent float.
Zynga, an online games developer that makes lots of games for Facebook users, fizzled in its debut and ended down 5 per cent on its first day of trading. No one Reuters spoke with said they were expecting a fall in Facebook’s stock today.
Facebook was celebrating its Wall Street debut with an all-night “hackathon” at its Menlo Park, California, headquarters starting yesterday evening, a company tradition in which Facebook’s computer programmers work on side projects that sometimes become part of the main product offering.
Sports books and oddsmakers
Despite the high expectations, Facebook faces challenges maintaining its growth momentum.
Some investors worry the company has not yet figured out a way to make money from the growing number of users who access Facebook on mobile devices such as tablets and smartphones.
Meanwhile, revenue growth from Facebook’s online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.
Sports betting firms had varying estimates of where Facebook would end up at the close of its first day of trading. Spreadex Limited in the UK said clients were speculating shares could end up trading above US$56 a share in the first day, having come down a bit in price since the number of shares slated for sale was increased.
Betting on Intrade, a popular online betting site for political events, bet on a closing price anywhere from US$25 to US$60.
“Hundreds of millions of people are extremely passionate about this product,” said Steve Weinstein, an analyst with ITG Research. “A lot of those people want to be a part of this event, of this company that they have an affinity for.
That’s creating a level of excitement for the stock that you don’t normally see.”
Some financial advisers have warned their clients against jumping into Facebook right away, but the well-known brand could still attract enough interest to exceed the 458 million shares traded the day General Motors went public after emerging from bankruptcy in 2010.
One UBS adviser initially received calls from 12 clients clamouring to buy shares of Facebook, but over the past couple of weeks, two have changed their minds.
“A lot of people are thrown off by the recent negative stories in the press,” the adviser said, speaking on condition of anonymity. “One guy was worried about General Motors stopping its advertising on Facebook.”
GM said on Tuesday it would stop placing ads on Facebook, raising questions about whether the display ads on the site are as effective in reaching consumers as traditional media.
Overall, financial advisers are struggling to manage clients’ expectations about what the stock will do and in some cases, if they will be able to get any stock for them.
“People want to just own it because they think it’s the next Google and they missed out on that,” said a finanial adviser from Wells Fargo Advisors. — Reuters