News that Facebook’s IPO is oversubscribed will not surprise readers of this blog (see tab to bottom right for our previous piece on Wall Street’s usual IPO shenanigans). It looks like the company will raise at least $10.6bn with the shares priced towards the top end of the $28 – $35 range and so valuing the social networking behemoth at circa $100bn. There is even a chance that the final pricing might be towards the $40 a share level, although I expect the collective team behind Facebook will be looking for an initial 10-15% ‘pop’ in the shares when they start trading next Friday and so will temper the final pricing.
The roadshow commenced in earnest last Monday and, despite concerns over its corporate governance and slow growth in mobile revenues, it seems the ‘story’ is being well received by institutional investors en bloc, even though the company released a veiled ‘profits warning’ on Thursday, blaming, amazingly, the surge in people accessing the site with their tablet and mobile devices and that the costs involved with this relative to the, as yet, inability to monetise this would (!) drag on the company’s medium term financial prsopects – an ignominious start to the companys public profile if ever I saw one…
Investors and shareholder groups have also raised concerns over Facebook’s dual class shareholding structure, which will allow its 28-year-old founder Mark Zuckerberg to continue running the social network as if it were a private company. I never cease to be amazed at the collective willingess of investors to suspend disbelief in swallowing a story when many warning signs are there.
Any pop over 20% in the shares when they begin trading and I for one will be opening a medium term Put position in the stock.