On the Face of it Never Judge the Book by It’s Face !….that’s the lesson learnt from Facebook’s lack lustre Listing yesterday
Facebook IPO Price Fixed at US $ 38…Historic Nasdaq Listing sees Record Volumes and Underwriting support to not let Price drop below US $38…Quotes were expected to cross US $ 50…Never happened….Instead FB struggled right through the day
A record over 580 Million Shares were traded on the first day of Listing with the official Opening at US $ 42 and Official Closing at US $ 38.37….High & Low recorded was US $ 45 and US $ 38
Clearly the underwriters Morgan Stanley and all were supporting the Share at US $ 38 not allowing it to fall below the IPO Price
On hindsight,it would have been better to have kept the original price band of US $ 28 to US $ 35…then this Listing would have been deemed successful…..Price was raised just three days ago on record demand….Within 20 minutes of Trading the Price dropped below US $ 40 and began quoting at IPO Price Level of S $ 38 and had to be supported the full day by the Underwriters
The Market Cap yet is a strong @ US $ 105 Billion
It was never a Valuation Listing….but a Momentum and Sentiment Lusting (Yes,deliberately spelled Lusting!) !
For Day Traders,who were expecting it to be a Magical Listing Day Opportunity,it turned out to be a Nightmare !
Pitched at over 100 times Earnings and 25 + times Sales,Facebook clearly was being offered at a Huge Premium….Imagine the surprise,and even consternation of those who were allotted all that they had applied for !…they had applied for more shares than they really could afford or wanted,as they expected only a partial allotment…..in three and five months the lock in would also be out and the floating stock would increase substantially
So going Forward,what is FB’s Revenue Model ?….it has to be Targeted Increased rate Advertising….It has 900 Million members…there are @ 7 Billion People on this Planet…so it’s going to be like a Telecom ARPU story….Average Revenue Per Unit….It surely has its work cut out…Now the 29th Richest man on this Planet at US $ 19 + Billion worth,Founder Mark Zuckerberg reasserted FB’s objective when he rang the Bell by Remote from the FB HQ at Menlo Park,CA …” It’s not about the Money….We want to make the World a More Open and Connected Place”….the message may just wear off shareholders if Price drops below IPO Levels next week
Nasdaq experienced technical glitches that delayed the FB Trading by half an hour…Perhaps this was an ominous sign of Price Quoting Trends in FB that unfolded……Pre Opening Orders in the system were not automatically being reported as executed or not…Nasdaq was manually reporting these and took over four hours to set the system right
So should you be buying at US $ 38 in the secondary Market ?….the valuations are hyper ~ note I’m not saying hype !…it’s a continuing faith story in Zuckerberg to propel FB into doubling,trebling and multi factor accelerating FB’s Revenues over the coming years….at US $ 38 you will be paying a record premium for this Faith….the risk is clearly there…take it or leave it !
A last thought for now….I am a regular user of FB…and am sure of the 900 Million Members,Indians would probably be a 100 Million +….Now Then,Zuckerberg,if we have contributed to your success, and that you would continue to need us to sustain or grow FB,methinks you should list FB on BSE and NSE too !…it would set our Exchanges on Fire !…Think about it,Zuckerberg !