I promised I'd keep an eye on The Facebook IPO on Nasdaq.
http://streamabout.blogspot.com/2012/05/facebook-ipo-may-18.html because this IPO is going to attract in the more casual investor. And it looks like Zuckerberg is going to make 1 billion usd, alone. Not bad.
I will look at it closer as we get nearer but here's a view just now.
Seemingly it's important to note that I'm not giving financial advice here just a view, just a blog. Trust me, take it only as that. Put it this way - When we floated on Nasdaq in March of 2000, we used Lehman Brothers......
Firstly, given a date of May 18th, the IPO Roadshow has now started and indications are that even this is attracting huge interest, despite a depressed market.
Which in turn can mean, that a lot of traders are seeing the IPO as nirvana (because the market is depressed and lacking opportunity) and therefore, will want to push the share price to rise, in order to profit. So expect to see their "buy" recommendations.
They'll want to generate hype and appear "Bullish" (share price to rise).
Indeed, one pal told me that the interest in the Roadshow is so strong, some analysts will be turned away at the door. The ignominity of it.
So that's the 1st sign of being Bullish. The Roadshow is strong.
Secondly, filings with The SEC in the US have been made and you can see them here in detail http://sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm
No mention here of the price (we won't know that until the day before) although investors will buy the shares during the last week and we'll get an indication then - but I'm going to estimate it at the end of this blog.
But reading the filings, appear to me anyway, to be confident, bullish. Remember too, with recent cash acquisitions all round, market confidence is strong, cash is out there. Bullish Sign two. Filings are confident, recent "bubble" acquisitions mean cash is there.
Thirdly, in those filings it's interesting to note The Facebook strategy in their own words This is one of the big issues when you go public - you have to disclose stuff that you wouldn't otherwise.
It's about growth (more users in less FB penetrated countries); New products; Better experience on more devices; A focus on mobile; Payment enabling (interesting one this); And more Ads. Expected it to be upbeat but this is global domination. Sign three - The company is Bullish.
You'll read extracts from the strategy at the end of this in red.
Attached to the filing is a letter from The Zuck signed by the man himself. It tells us nothing except how much "corporate" they've become and again you can read it later here in red. Funny signature mind...
Fourthly, I'm thinking that this is going to be a bullish IPO driving up the price short term to allow for a profit. But of course, it depends on the price.
What'll it be?
Well look at this way.
They paid a billion usd for Instagram in 23 million shares and 300m usd in cash. Therefore the 23m shares had a value of 700m usd. Divide them and you get circa 30 usd a share. However they have been traded on the secondary market at 40+ usd a share.
A massive P/E ratio way higher than Google.
And I think it's going to be pitched high. Remember too, that pricing was at the time of The Instagram acquisition. Post acquisition it increases value (with some arguing why Facebook bought Instagram in the first place).
There's a balancing act here - to go too high will discourage market action and a lower price will encourage general private action.
At 40 usd a share it's over that "100 billion" valuation that the market is talking about and I think, where Facebook ultimately wants to be.
It's a magic number that will draw headlines - and will be a barrier to be broken - but after that barrier, I think you'll see selling I think because as it rises, people will sweat.
The indications are already in a 28 - 35 dollar range - low - but low enough to spur the market tactically (valuing the company circa 90 billion usd). Investors who promised to sell 6 months post IPO, bought at 31/32 dollars.
I think they'll pitch it at the high end circa 35 usd a share.
Expect a piling into it, but stay really, really careful here. It will probably to go up past 40 usd (and possibly way past on the day) then flatten then selling. Very quickly becoming Bearish.
If you are going to have a go, get your online trading account open now and you must be prepared to constantly watch the price. So get used to doing that now on any stock/equity just to understand it.
Remember, this could be a mugs game if you don't know what you're doing.
When one person sells a share and another person buys that share, they both think they're being intuitive.
But the Facebook IPO might be a real chance to make money - in and out.
I might change my view so come back to look.
We will see.
SEC FILING EXTRACTS
Our Strategy
We are in the early days of pursuing our mission to make the world more open and connected. We believe that we have a significant opportunity to further enhance the value we deliver to users, developers, and advertisers. Key elements of our strategy are:
Expand Our Global User Community. We continue to focus on growing our user base across all geographies, including relatively less-penetrated, large markets such as Brazil, Germany, India, Japan, Russia, and South Korea. We intend to grow our user base by continuing our marketing and user acquisition efforts and enhancing our products, including mobile apps, in order to make Facebook more accessible and useful.
Build Great Social Products to Increase Engagement. We prioritize product development investments that we believe will create engaging interactions between our users, developers, and advertisers on Facebook, across the web, and on mobile devices. We continue to invest significantly in improving our core products such as News Feed, Photos, and Groups, developing new products such as Timeline and Ticker, and enabling new Platform apps and website integrations.
Provide Users with the Most Compelling Experience. Facebook users are sharing and receiving more information across a broader range of devices. To provide the most compelling user experience, we continue to develop products and technologies focused on optimizing our social distribution channels to deliver the most useful content to each user by analyzing and organizing vast amounts of information in real time.
Build Engaging Mobile Experiences. We are devoting substantial resources to developing engaging mobile products and experiences for a wide range of platforms, including smartphones and feature phones. In addition, we are working across the mobile industry with operators, hardware manufacturers, operating system providers, and developers to improve the Facebook experience on mobile devices and make Facebook available to more people around the world. We believe that mobile usage is critical to maintaining user growth and engagement over the long term.
Enable Developers to Build Great Social Products Using the Facebook Platform. The success of our Platform developers and the vibrancy of our Platform ecosystem are key to increasing user engagement.
We continue to invest in tools and APIs that enhance the ability of Platform developers to deliver products that are more social and personalized and better engage users on Facebook, across the web, and on mobile devices. Additionally, we plan to invest in enhancing our Payments offerings and in making the Payments experience on Facebook as convenient as possible for users and Platform developers.
Improve Ad Products for Advertisers and Users. We plan to continue to improve our ad products in order to create more value for advertisers and enhance their ability to make their advertising more social and relevant for users. Our advertising strategy centers on the belief that ad products that are social, relevant, and well-integrated with other content on Facebook can enhance the user experience while providing an attractive return for advertisers. We intend to invest in additional products for our advertisers and marketers while continuing to balance our monetization objectives with our commitment to optimizing the user experience.
"Focus on Impact
If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.
Move Fast
Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they’re more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: “Move fast and break things.” The idea is that if you never break anything, you’re probably not moving fast enough.
Be Bold
Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that’s changing so quickly, you’re guaranteed to fail if you don’t take any risks. We have another saying: “The riskiest thing is to take no risks.” We encourage everyone to make bold decisions, even if that means being wrong some of the time.
Be Open
We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.
Build Social Value
Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.
"
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