The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Facebook Institutional Demand can wait – Facebook uses up greenshoe as price drops below $34 | Deal Insight

According to informed sources posted by the Investment Bankers to Facebook, the first day of trading hit a few snags apart from the Trading system design for retail orders on NASDAQ. The 60 mln shares available on the Green shoe to the underwirters could have been used to net an additional $2.54 bln for the b#3 largest IPO in the USA was used up in supporting the Facebook IPO price of $38 after listing day trading did not go down well with investors. More than a million shares were in supply apparently and with only 30 mln more shares left with the investment bankers from the green shoe they won’t be supporting the new listing much from here. The shares opened 12% lower on its second day after these results of Day 1 were enough to spread the word about the social network among friends and E*Trade users among others. ETrade was one of the 33 underwriters appointed by the Company and sold directly to retail investors.  That also means your favorite social investment; much a single way trend on its Secondmarket listing for

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Logo for E-Trade (Photo credit: Wikipedia)

the last three years would be available at a real bargain in a few months when more supply enters the market after expiry of 3 month and 6 month lock-ins for investors.

Initial digs at the company pre IPO suggested that valuations could be as low as $19 when the first range of $28-35 was announced. Our $19 price was based on the run of a valuation calculator (DCF) with a 20% sales growth projection despite the current 60% sales growth and keeping the margins 50%

Morgan Stanley in the meantime is likely busy posting another frame so NASD voluntarily takes the first hit for the IPO  failure as the new price discovery exercise reopens on the exchanges after the heady IPO roadshow calendar. That means many funds will wait at least six months till they put the facebook scrip in their portfolios and start the inevitable Apple -FB-NASDAQ 100 comparisons


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