The news that Webush Securities had slapped a price target of $44 per share on the soon to list social networking giant raised a wry smile with me this weekend. I wonder where Wedbush stand in the pecking order of fees to be made out of Facebook?
The pricing of Facebook’s shares towards the ‘lower end’ (!) of its mooted price range at $28 – 35 is typical of the shenanigans Wall St brokers and the companies they are about to IPO play, as the more seasoned traders and investors amongst us will be aware of. It is nothing but an exercise to attempt to garner more interest in the stock with a view to pushing the price towards the top end of the valuation range just before the IPO – don’t be suprised to hear that the final pricing is at $35 and maybe beyond.
The company is planning to sell about 340 million shares in the offering. At the high end of the range, the IPO would raise $11.8 billion – the larges tech money raising on record and value the company at between $85 – 95bn – approx 100 times the most recent years earnings.
The performance of Groupon in recent months is a salutary reminder that not all tech IPO’s should be purchased and that in many cases, the reason they are in fact IPO’ing (unless requiring cash for growth) is that the clever chaps who created the company and the initial backers, perceive that the valuation is full – would you want to be on the other side of that transaction?