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Entries in Initial Public Offering (20)

Friday
May252012

Morgan Stanley to Pay Back Investors over Facebook IPO?

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley, the lead investment bank in the Facebook IPO, might pay money to some retail investors who overpaid when they bought the stock.

Published reports say the firm is reviewing orders from Morgan Stanley Smith Barney clients. 

Technical problems at the Nasdaq stock market caused delays and confusion about Facebook trading last week.  There have also been many questions, even lawsuits, over tip-offs received by Wall Street insiders about negative reports on Facebook’s future profits and revenues.

Copyright 2012 ABC News Radio

Wednesday
May232012

Regulators to Review Morgan Stanley's Role in Facebook IPO

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Since its debut on NASDAQ last Friday, Facebook's stock has been sliding, dropping from an initial public offering price of $38 to just under $32 by Tuesday's close.

Co-founder Mark Zuckerberg has already lost several billion dollars, considering he owns more than 500 million shares in the company.

Most felt that Facebook was widely overvalued at $38 share.  And now, a potential scandal is brewing as the Financial Industry Regulatory Authority might investigate reports that as bankers were building up the IPO to the public, they were privately lowering revenue forecasts and perhaps sharing their predictions with integral investors.

Massachusetts' Secretary of State William Galvin's office has issued a subpoena to Morgan Stanley that seeks information about discussions the bank had with certain clients about Facebook’s IPO.  Galvin wants to know if the bank secretly revealed to clients that its analysts had cut its revenue estimate for Facebook

"It is so important that we not allow this situation to go uninvestigated," Galvin told ABC News.  "Given the breadth and size of the issue and the losses that are out there it’s important that we move rapidly."

"So many investors have lost so rapidly so much," he added.  "We intend to move quickly.  We need to get answers for average American investors."

Meanwhile, one investor is considering a class action lawsuit against the NASDAQ for computer glitches last Friday that prevented many from purchasing Facebook stock.

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Copyright 2012 ABC News Radio

Tuesday
May222012

Facebook IPO: Lessons for Investors

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- With Facebook's stock down 11 percent at Monday's close, many retail investors who thought they were getting the hot ticket in town may soon be playing hot potato with their Facebook shares.

If there's one lesson to be learned from Facebook's IPO letdown, it's don't buy a stock based on emotion, said Bill Middleton, president of Sound Portfolio Advisors of Mystic, Conn.

Those excited investors who bought at $45 a share -- Facebook's high on Friday -- had a rude awakening when the stock opened on Monday below its offer price of $38, and closed at $34.03.

"This is one of those things built on hype, and they maximized the hype," Middleton said.

Nevertheless, hype is to be expected for a such a widely used consumer product.

"What people forget is that Google went down, too, not from the IPO, but down the first week," Middleton said.  "So, what you're seeing with Facebook is not completely uncommon.  This, though, is a different kettle of fish."

Google was priced at $85 a share at its IPO in 2004 -- 74.6 times its earnings, or price-to-earnings ratio.  Shares of the search engine and advertising behemoth, based in Mountain View, Calf., closed up 2.28 percent on Monday to $614.11 a share.

Facebook's IPO price of $38 a share was 100 times its earnings -- a high price-to-earnings ratio, even for an eight-year-old company, Middleton said.

"That's a difficult environment, with Microsoft at 10 times earnings," said Middleton.  "Exxon is at 10 times its earnings.  Even Apple is at 14 times."

Not only was last week a difficult environment for stocks -- one of the worst of the year -- but Facebook's IPO terms with its underwriters or investment bankers may have also created an unfavorable environment for retail investors.

"Usually, coming off the IPO price, the underwriters try to leave a little room for retail buyers to have a good experience," Middleton said.  "Here, Facebook squeezed the underwriters so hard that they squeezed every last penny they possibly could out of the offering price."

Copyright 2012 ABC News Radio

Monday
May212012

Nasdaq CEO 'Embarassed' by Glitches During Facebook's IPO

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- The chief executive of the Nasdaq stock market admits he was “embarrassed” by what happened on Friday when trading glitches led to doubts about the market’s ability to handle hot IPOs.

Nasdaq not only delayed the start of trading Facebook by a half hour, but there were technical problems throughout the day.

The Financial Times
says the exchange is “in talks with regulators over potentially millions of dollars of customer claims.”  

Technical problems left investors with orders that were improperly processed.  The cause was said to be a malfunction in the trading system that processes order cancellations.

Friday’s session saw about 570 million Facebook shares changing hands -- the largest ever for an IPO.  Nasdaq officials insist the trading problems didn’t have any impact on Facebook’s stock price.

Copyright 2012 ABC News Radio

Monday
May212012

Facebook Shares Plunge Below IPO Price

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- Shares of Facebook plunged below its IPO price and previous close, opening down 11 percent to $33.83 on Monday morning.

Facebook stock closed at about $38.23 on Friday evening, only slightly above its IPO price of $38 a share set on Thursday night.

“Facebook is getting slammed as investors who hoped for a momentous run instead take the disappointing first day performance as a cue to flee the stock.  The price action is also more telling of what likely would have taken place Friday afternoon if Morgan Stanley hadn’t been propping up its shares above the offering price,” said Jim Krapfel, IPO analyst with investment firm Morningstar.

“There was some thought that Morgan Stanley would continue to prop up shares today but clearly the demand was too overwhelming to keep shares from falling.  The weak action clearly shows that some of the speculative froth in technology IPOs has abated, welcome news in our view,” Krapfel continued.

The IPO had some technical glitches on NASDAQ Friday morning, delaying its trading and confusing some investors who did not receive confirmation of their trades until hours later.

Copyright 2012 ABC News Radio

Friday
May182012

Facebook's IPO Launches: Should You Buy Stock?

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- Facebook's initial public offering, the biggest IPO for a U.S. technology firm, has gotten the attention of everyone from high school students to Wall Street professionals, many of whom are likely among the 900 million monthly users of the social media site.

While Facebook announced on Thursday that its initial public offering of common stock would be priced at $38 a share, raising $16 billion and valuing the company at $104 billion, the shares available for purchase by the public will likely be priced higher.  That's causing many analysts to caution individual investors not to rush into making any risky investments.

"Yes, it's the biggest investing storyline of the year, but I would tell the average investor: stay away from Facebook," Andrew Tonner, financial editor of The Motley Fool, said.  "Sit on the sidelines.  Having interest in the IPO doesn't necessarily mean you need to participate in it."

Some analysts say the long-term risks for the company are real.  Facebook has admitted that it has yet to make significant revenue from mobile advertising and that there is little it can do to make a foray into China, whose government has blocked the country's estimated 500 million Internet users.

Out of four recent technology IPOs -- those of LinkedIn, Zynga, Pandora and Groupon -- only LinkedIn has recently traded above its IPO price.  LinkedIn's IPO price last May was $45 a share.  On Thursday, shares of LinkedIn closed down 7.5 percent to $105 a share.

To satiate the growing investor appetite for shares of the social media company, on Wednesday, Facebook increased the number of shares to be sold at the market debut by 25 percent.

The company is offering 421.2 million shares of common A-class stock, which includes 180 million new shares sold by the company and 241.2 million shares sold by existing shareholders, such as early investors in the company and Facebook's founders.

Facebook's lead underwriter, the investment bank Morgan Stanley, determined who got shares of the company before shares are sold to the larger public on Friday, said Jim Krapfel, IPO analyst with the Morningstar investment firm.

All of the 421 million shares were sold Thursday at the $38 offering price to those investors who met the minimum buy-in requirements.

Some of those "prestige clients" are large institutional investors who manage workers' 401(k) funds.  But an individual with a $10 million brokerage account at Morgan Stanley could buy Facebook stock on Thursday at the offering price.  And those individuals can sell those shares on Friday, when the price is expected to jump to $50.

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Copyright 2012 ABC News Radio

Friday
May182012

Facebook CEO Mark Zuckerberg Ushers in Historic IPO

Zef Nikolla/Facebook(MENLO PARK, Calif.) -- After some technical hiccups, trading in Facebook's blockbuster IPO officially opened to an eager public Friday at about $42 a share, up 11 percent from its offer price of $38 a share.

Mark Zuckerberg, CEO and founder of Facebook, and COO Sheryl Sandberg gathered with a throng of cheering employees at the company headquarters in Menlo Park, Calif., to ring the Nasdaq's opening bell at 9:30 a.m. eastern time ahead of the social media network's long-awaited IPO.

Trading of the company's shares, designated with the ticker symbol, "FB," was scheduled to begin around 10:45 a.m. eastern time but began almost an hour later because Facebook's underwriter, Morgan Stanley, was reportedly having trouble changing orders.

Visit Yahoo Finance for real-time trading of Facebook shares.

With a large monitor and stage set up outdoors, instead of visiting Nasdaq's New York exchange, hundreds of employees gathered early Friday morning in California.  Many of them had participated in Facebook's "hackathon," a company tradition described as an overnight sleepover that encourages employees to work on anything but their normal work duties.

Not to abandon Wall Street completely, Facebook CFO David Ebersman was at the Nasdaq in New York City during the opening bell.

On Thursday night, Facebook priced its initial public offering at $38 a share, raising $16 billion and valuing the company at $104 billion.  The company is offering 421.2 million shares of common A-class stock, which includes 180 million new shares sold by the company and 241.2 million shares sold by existing shareholders.

Copyright 2012 ABC News Radio

Thursday
May172012

Facebook's IPO: What It Means For You

LOIC VENANCE/AFP/Getty Images(NEW YORK) -- At the same time the price and public clamor for Facebook's blockbuster IPO is rising, experts' expectations for the company's performance are in decline.

The company on Tuesday raised the asking price of its offering -- expected on Friday -- from a range of $28-$35 to $34-$38.

In a survey of 124 portfolio managers and buy-side analysts conducted by Rivel Research Group, only 8 percent said they expect to see Facebook trading above its offering price six months after the initial public offering.  Thirty-one percent said they expect the offering to have no impact whatsoever on the overall market for IPOs.

Yet excitement among ordinary investors for the IPO continues to run high, given that past IPOs have made some investors rich.  An analysis by ABC News shows, for example, that a share of Johnson & Johnson bought at the IPO price of $375 would be worth $10 million today.  A share of Apple bought at the 1980 IPO price of $22 would be worth about $44,800 now.

The fact that Facebook's stock has been virtually impossible for little guys to buy in advance of Friday's offering may only have heightened the shares' appeal, on the principle that what people want most are things they cannot have.

Jay Ritter, an expert on the history of IPOs and a professor of finance at the University of Florida, says Facebook's offering is indeed historic.

"This is more than just another IPO," he says.  "It's the largest ever for an Internet company, and among the largest for any in U.S. company in history."  It's unprecedented, he says, for a company just eight years old to receive a market cap of $100 billion.

Ritter says other recent IPOs have raised comparable amounts, including Visa's IPO and GM's in 2010.  Both companies had name recognition: "Everybody knows GM.  Lots of people have a Visa card."  Yet neither offering generated anywhere near the excitement as Facebook's.

Of course, neither company had a chief executive of Mark Zuckerberg's star power or youth appeal.  And, says Ritter, neither had Facebook's "blistering" growth rate.

"People confuse rapid growth with a good investment," he says.

Now the $100 billion question is, can Facebook maintain that growth by better monetizing its 900-million-plus users?

Copyright 2012 ABC News Radio

Thursday
May172012

Facebook Employees Will Be Ringing in IPO with 'Hackathon'

Peter Foley/Bloomberg via Getty Images(MENLO PARK, Calif.) -- It’s going to be a sleepover at Facebook the night before the big IPO.

Employees from the social networking site will be holding what the company calls a "hackathon" Thursday night. 

According to Facebook, "Hackathons are a big tradition at Facebook.  They serve as the foundation for some great (and not so great) ideas.  It gives our employees the opportunity to try out new ideas and collaborate with other people in a fun environment."

Basically, the company’s employees spend the night working on their ideas to see where they go.  Everyone at the company is invited.

This is something they have done in the past, but this will be their last such endeavor as a private company.

The next morning, Mark Zuckerberg will ring the opening bell on Wall Street, making many of these employees millionaires and billionaires.

Copyright 2012 ABC News Radio

Tuesday
May152012

Facebook Feeding Frenzy Boosts IPO Range

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- A feeding frenzy for Facebook stock is pushing the price higher for the year’s hottest initial public offering.

The social networking site that was started in Mark Zuckerberg’s Harvard dorm room eight years ago is set to raise the price range for its IPO -- set to take place on Friday -- from $34 to $38 a share, putting the firm’s value at more than $100 billion.

From hedge fund managers to small investors, there’s a huge appetite for Facebook stock.  The New York Times reports in Asia alone, the offering is said to be more than 25 times oversubscribed.

“This is going to be the most talked about IPO,” says Tim Stevens, editor of the tech website Engadget.

But some analysts say the hype is totally overblown.  Despite its huge popularity, profits have been relatively modest, and if the site boosts revenue by increasing advertising on its pages, there’s a risk many users will unfriend Facebook.

Copyright 2012 ABC News Radio







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