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Only big canadian investors will have shot at facebook shares by wwy yrj
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Only big canadian investors will have shot at facebook shares by WWY YRJ
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| Article Posted: 11/26/2012 |
| Article Views: 57 |
| Articles Written: 1412 - MORE ARTICLES FROM THIS AUTHOR |
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Only big canadian investors will have shot at facebook shares |
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Business,Business News,Business Opportunities
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Canadian Facebook fans are unlikely to share in the excitement ofthe social media giant's hotly anticipated initial public offering. That's because only the biggest Canadian players have accounts withthe social media company's underwriters, who are responsible fordoling out shares to investors. Investment advisers usually receive fewer shares than they want ofa stock that's in high demand. They then distribute whatever sharesthey get among their clients. By the time Facebook shares actually hit stock exchanges, the priceis expected to at least have doubled from the initial asking price.
Facebook hopes to raise about $5 billion US in its IPO when thecompany sells a small piece of its business to the public. Theoffering is expected later this year. The entire California company could be valued at $100 billion US oreven more, depending on the market reaction to its stock sale. Facebook did not indicate an initial offering price, which will bedetermined by underwriters depending on the level of interest, butit has been estimated at between $30 to $35 per share. That leaves about 167 million shares in circulation, which scarcelycovers intense demand for the world's biggest social networkingwebsite.
"They're only going to give it to their biggest, best client andeven they're going to get very, very small amounts," said JohnO'Connell, CEO at Toronto-based money manager Davis Rea. Investment advisers, who usually receive fewer shares than theywant of a stock that's in high demand, distribute those sharesamong their clients. By the time Facebook shares actually hit the public stock market,in about three months, the price is expected to at least havedoubled from the initial asking price causing even moreinvestors to want to jump on board. "Nobody's going to get everything that they want, so some peoplewill decide to flip it for a quick profit and some will decide tobuy more," O'Connell explained.
Investors need to look beyond the hype and focus on whether thecompany's books justify its valuation. O'Connell warns that traders have lost a lot of money by buyinginto similarly hyped public offerings that inflate stock prices atcompanies that later tanked. "It's amazing that so many people want to buy this thing and theydon't know anything about the company's financials that says alot about investors' thought processes." "Some of these stocks change at huge, huge premiums initially andoftentimes they tend to drift lower over time because investorsstart taking a very sober second look at what the business is allabout." The regulatory filings showed what analysts have long suspected that Facebook is very profitable and growing. The company MarkZuckerberg started in a Harvard dorm in 2004 has seen its annualrevenue soar from $777 million in 2009 to $3.7 billion last year.Facebook's earnings have grown at a similar rate too, ballooningfrom $122 million in 2009 to $1 billion last year. Facebook ended 2011 with $3.9 billion in cash.
That's a relativelysmall amount compared to the nearly $45 billion that Google has inthe bank and peanuts compared to Apple's nearly $100-billionstockpile. Facebook ended last year with 845 million users, up 39 per centfrom 608 million at the end of 2010. The company generates about$4.39 in revenue per user. Facebook is just the latest tech company to make an eagerly awaitedIPO in the last year. The early crop has included Internet radio service Pandora MediaInc., professional networking service LinkedIn Corp.
and dailydeals company Groupon Inc. Most of those Internet IPOs haven'tlived up to their lofty expectations. The list of disappointmentsincludes Zynga Inc., which has built a profitable business bycreating a variety of games to play on Facebook. Zynga's stock fellfive per cent below its IPO price on the first day of trading. I am Furniture & Furnishings writer, reports some information about steel frame gazebo , pvc edging tape.
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