At half price, FB shares still not a steal for some

WASHINGTON - Facebook shares have lost nearly half their value since a highly touted initial public offering (IPO) in May, but it's still not a bargain for some.

Facebook in the past week dropped below US$20 (S$25) a share for the first time since its US$38 offering price in May.

Last Friday, the stock rebounded 5 per cent to US$21.09, but remained down by a hefty 44.5 per cent.
There is some fear that shares could take another hit in the middle of this month, after the expiration of a "lockup", a 90-day period after the IPO during which insiders are barred from selling.

Mr Michael Comeau of the financial website Minyanville said that 268 million shares could come onto the market, in addition to the 460 million that are already floated. And more will become available later this year.
"I'm fixated on the 268 million shares that will hit in two weeks," he said.

"Will there be enough buyers to satisfy the new supply?"

Mr Comeau said that analyst full-year earnings estimates on Facebook "are actually coming down" from 51 cents per share to 49 cents.

"Declining earnings estimates are usually a negative indicator for momentum stocks," he added.

Facebook underwhelmed the market last month, when it reported its first earnings as a public company, barely meeting estimates for earnings per share and delivering disappointing revenue growth.

The results showed growth for Facebook in overall revenue, operating profits and the number of users - which increased to 955 million by the end of the quarter.

But the company indicated in a regulatory filing that as many as 83 million accounts may come from dubious sources - duplicate accounts, pages for pets and those designed to send spam.

Mr Trip Chowdhry of Global Equities Research, who has consistently said Facebook was overpriced, said that the company may be a victim of its own success.

"Everybody's on Facebook. Your parents are on Facebook. Your neighbours are on Facebook," he said.

"So what do people do? They create fake IDs or they go hang out somewhere else. People are reducing their engagement on Facebook."

Mr Chowdhry said that it remains unclear if Facebook can "transcend" the current generation of users, or will be replaced by something else.

Additionally, he said that there is "a lot of uncertainty" about the expiration of the lockup, adding that the stock is still not a bargain.

"The stock is reflecting that the company can grow 80 to 90 per cent year-over-year, which is impossible," he said.

Mr Larry Chiagouris, a professor of marketing at Pace University, said Facebook has yet to define its strategy for long-term growth and profits.

Mr Chiagouris said founder Mark Zuckerberg's mantra, that he wants to "help every person stay connected" and "be a great social experience", is too fuzzy.

"That is not focused enough," he told AFP.

"They probably expanded too quickly without articulating their mission. From a profit-making perspective, Facebook has kind of lost its way."

CPF caps wrap fee for CPF Investment Scheme

From 1 July 2012, the CPF Board will subject the wrap fee charged for CPF Investment Scheme (CPFIS) investments to a maximum limit of 1% per annum.

The cap on wrap fees is intended to help members lower the costs of investing their CPF savings over the longer term. The move is another measure taken by the CPF Board as part of its efforts to progressively lower the costs of investment and improve the quality of products offered under the CPFIS since 2006. Past measures include the tightening of admission criteria for new funds and the setting of fee caps on sales charges and fund expense ratios

A wrap fee is a regular charge paid to financial advisers for providing bundled investment services, such as advisory, brokerage and administrative services. Also known as an ongoing fee, the wrap fee is typically levied monthly or quarterly by liquidating a small portion of the investment. Currently, CPF members who maintain wrap accounts for their CPFIS unit trust investments are charged a wrap fee of up to 1.5% per annum by their financial advisers.

The CPF Board urges members who wish to invest their CPF savings for potentially higher returns to do so prudently and to scrutinise the total cost of investment as high costs may potentially erode investment returns significantly over the long term.

Since 2006, the CPF Board has been undertaking measures to progressively lower the cost of investment and improve the quality of funds under the CPF Investment Scheme. The summary of the measures taken are as follows.

From	Description
1 Feb 2006	Tightening of admission criteria. New funds must: (i) meet the revised benchmark set at the top 25 percentile of funds in the global peer group; (ii) have expense ratio that is lower than the median of existing CPFIS funds in its risk category; and (iii) preferably have track record of good performance for at least 3 years.
1 Jul 2007	Sales charge for CPFIS-included funds must not exceed 3%.
1 Jan 2008	Expense ratios for CPFIS-included funds must not exceed the median of existing CPF funds in its risk category: Risk Categories Expense Ratios Criterion (%) Higher risk 1.95 Medium to High Risk 1.75 Low to Medium Risk 1.15 Lower Risk 0.65
1 Jan 2011	All existing funds must meet the stricter admission criteria before accepting new CPF monies.

More information can be found from CPF Website.

Central Provident Fund Investment Scheme ongoing charge capped at 1%

About 30,000 Singaporeans stand to benefit from a new rule that will make it cheaper to invest under the Central Provident Fund Investment Scheme (CPFIS).

The CPF Board is placing a limit of 1 per cent a year on the wrap fee charged on unit trusts included in the CPFIS, starting from July next year.

A wrap fee is a regular charge paid to financial advisers for providing bundled investment services, such as advisory, brokerage and administrative services.

Also known as an ongoing fee, the wrap fee is typically levied monthly or quarterly by liquidating a small portion of the investment, which eats into returns.