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."

Nasdaq's $51m offer for Facebook losses draws criticism

NEW YORK (REUTERS) - Nasdaq OMX Group said it will offer US$40 million (S$51 million) in cash and rebates to clients harmed by its mishandling of Facebook's market debut.

But the proposed compensation, subject to approval by regulators, drew sharp criticism from rival exchanges for its use of rebates and from clients claiming losses far in excess of what Nasdaq is offering.

Nasdaq said on Wednesday US$13.7 million would be paid to its affected member firms and the balance would be credited to members to reduce trading costs, with all benefits expected to be awarded within six months.

'We have been embarrassed and certainly we apologised to the industry, but the important thing we have to do is focus on the future,' Nasdaq chief executive Robert Greifeld said in an interview on CNBC on Wednesday.

Facebook underwriter Morgan Stanley defends IPO

NEW YORK: The chief executive of Morgan Stanley on Wednesday defended his company's lead role in the disastrous IPO of Facebook, which has lost investors billions of dollars.

James Gorman told an internal staff meeting that the bank had worked "100 per cent within the rules" in heading the US$16 billion stock issue, according to a person who was at the meeting.

The source said Gorman also condemned the "speculation of nefarious activity" that has surrounded the issue and drawn at least eight class action lawsuits against Facebook and its underwriters.

He said the social networking giant itself was happy with the bank, even though the company's shareprice has now sunk nearly 26 per cent from the US$38 initial public offering price.

Facebook's chief operating officer Sheryl Sandberg had told him that the company "is very pleased with the way Morgan Stanley conducted itself, (saying) that we were very professional," Gorman told the group, according to the source.

Gorman blamed the overall economic environment -- especially the Greek financial crisis -- as well as technical problems at the Nasdaq market for "unprecedented confusion and disarray at the opening," when Facebook shares began trading on May 18.

"You don't control Nasdaq and you don't control Greece and the environment," he said.

It all "made for a very difficult start" .

Facebook's shares barely held above the issue price on the first day of trade and have steadily fallen ever since, wiping US$27 billion off of the company's IPO market valuation of US$104 billion.

Those losses have been taken by investors who are furious over how the country's second largest IPO ever flopped.

The anger stems in part from Morgan Stanley's having approved an increase in the shares issued and the share price just days before the share sale.

Also driving the fury and the lawsuits are allegations that the underwriters had given their best institutional clients private, downbeat forecasts for Facebook's finances just before the shares hit the market, while denying the same information to small investors.

The result, the accusations say, was that the better-informed big investors immediately dumped their shares leaving smaller investors to take the losses.

Gorman insisted that the shareprice should be seen over a 12 month period, and not just in the short term.

"Facebook is a great company and will still be in so in a few months," he said.

After flat debut Facebook awaits market verdict

NEW YORK: Facebook stumbled on its first trading day as shares ended barely above the starting price, raising questions about what will happen to the share price when the Nasdaq reopens on Monday.

The stock, priced at US$38 on Thursday in the largest ever initial public offering (IPO) for a technology firm, eked out a gain of just 0.61 per cent to end at US$38.23, amid record volume of more than 575 million shares traded.

Shares in the social network titan saw roller-coaster action in what was one of most keenly awaited stock issues in history. The day began with a 30-minute delay in trade, an incident which regulators are still reviewing.

Shares jumped 12 per cent to US$42.55 in opening trade but within minutes fell back to the offering price. A midday rally failed to sustain its momentum and the price tailed off before the close.

"The negativity in the market overall has put a damper on the IPO," said Darren Hayes, a Pace University professor and former investment banker.

"It's not uncommon in an IPO to see a big rise and then for the price to come back down, but I'm a bit surprised after all the hype to see such a small gain."

A report on the Business Insider financial blog said the price held at US$38 because of a large number of standing orders at the offering price. The Wall Street Journal said the underwriting investment banks stepped in to support the price.

"It's hard to know what would have happened if the banks hadn't stepped in," said Lou Kerner of the Social Internet Fund.

James Hughes, chief market analyst at London's Alpari, said "the real value of Facebook is not likely to be known until the hype of the IPO has died away and investors have been able to digest how the company is going evolve to be the money-making machine many expect it to be."

Investors were expected to be hungry to get a piece of Facebook, which has become a global phenomenon since its humble beginnings in 2004 as a project of then-Harvard student Mark Zuckerberg and his classmates.

Zuckerberg, 28, wearing his trademark hooded sweatshirt, remotely rang the bell to open the Nasdaq, marking the start of trade.

He told the crowd at the company's new campus in Menlo Park, California, that going public is a "milestone" but added: "Our mission isn't to be a public company. Our mission is to make the world more open and connected."

The market debut was disappointing compared with some recent tech IPOs. LinkedIn, a business-oriented social network, doubled its share price on its first day, and Groupon, a discount deal aggregator, jumped 30 per cent.

Others have not fared so well. Pandora, an Internet radio site, rose a more modest 8.9 per cent and online gaming site Zynga lost five per cent on its first day.

Trip Chowdhry, who follows Facebook for Global Equities Research, said the "lackluster" opening was because the company had failed to answer crucial questions about how it will boost revenues and adapt to the mobile Internet.

"Management cannot sing and dance around the key issues," he said.

There are concerns about Facebook's long-term ability to generate ad revenues, fueled by General Motors' decision earlier this week to pull its advertising.

GM had been spending about US$10 million on paid advertising and US$30 million on unpaid marketing on Facebook.

Another shadow hanging over Facebook is privacy.

Some consumer and privacy advocates say Facebook has been too loose with user data and hope that as a publicly traded company it may change its tune.

The IPO gave Facebook a dizzying value of US$104 billion at its market debut.

It raised more than US$16 billion, making it the richest after that of financial giant Visa in 2008, according to Renaissance Capital. The addition of a possible stock "over-allotment" could boost the total to US$18.4 billion.

With its current market value, Facebook is now among the most valuable US companies, ahead of sector giants Amazon (US$96 billion) and Cisco (US$89 billion), and more than twice the value of Ford Motor Co. (US$38 billion).

But it remains behind Google (US$196 billion) and Apple (US$496 billion).

Under the share plan, Zuckerberg holds 55.8 per cent of the voting power of Facebook shares, and over 18 per cent of the value of the company.

Despite the lingering concerns, some still see huge potential for growth.

"Facebook is a business that can succeed with far fewer employees than the technology behemoths of old," said Victor Basta of London-based Magister Advisors.

"Facebook's IPO filing implies a value per employee for its own business of US$33 million. Microsoft, by contrast, has a value per employee of US$3 million, reflecting the fundamental structural differences between the businesses."

Facebook posted a profit of US$668 million last year as revenue vaulted to US$1.06 billion.

Historic Facebook debut falls flat

SAN FRANCISCO - The historic initial public offering of Facebook Inc did not go as planned on Friday, as the social networking company's sky-high valuation combined with trading glitches left the stock languishing near its offering price at the market close.

Facebook shares began trading late Friday morning and opened 11 per cent above the US$38 (S$48) offering price, but after peaking at about US$45 slid rapidly at the end of the day to close at US$38.23.

The IPO was the third-largest in U.S. history and valued eight-year-old Facebook at $104 billion.

The surprisingly weak debut of a stock that analysts had predicted would climb between 10 and 50 per cent is not likely to dent the business prospects of Facebook, which boasts 900 million users and is upending business practices and social relationships around the world.

But the unexpected developments were a clear setback for Morgan Stanley, the lead underwriter on the deal, which sources said was forced to defend the US$38 price level by buying shares on the open market. Many market participants said they expected the stock to remain under pressure next week.

The offering also proved an embarrassment for the NASDAQ: the opening was delayed as the exchange struggled with a huge volume of orders, and for much of the day there were long delays in order confirmation. The SEC said late Friday that it was reviewing the situation.

Social media companies and Internet companies that had hoped to benefit from a Facebook halo effect were instead dragged down Friday, with social gaming giant Zynga dropping almost 15 per cent.

Analysts said Facebook may simply have over-reached in raising the IPO price range, pricing at the top of the range and increasing the size of the offering earlier in the week.

"The underwriters got greedy on behalf of selling shareholders and bumped the price high enough that they didn't get much of a bump on the first day," said Bill Smead, chief investment officer at Smead Capital Management, which did not buy Facebook shares in the IPO. "They increased the size of the deal and that really did a number on it."

Skeptics have argued all along that a valuation of more than $100 billion - about equivalent to Amazon.com Inc and exceeding that of Hewlett-Packard Co and Dell Inc combined - was far too high for a company that posted US$1 billion in profit and US$3.7 billion in revenue in 2011.

Concerns about Facebook's earnings potential were highlighted by General Motors' announcement this week that it would no longer buy paid advertising on Facebook.

"You don't need more than a small pencil and napkin to do a valuation on this, to say there are heroic assumptions in earnings growth to keep this at US$100 billion, much less US$115 billion or US$120 billion," said Dave Rolfe, fund manager at River Park Wedgewood Fund, which does not own shares in Facebook.

"I know there's a lot of excitement and exuberance, but it seemed today that the market is starting to do some hard valuation math early on."

Facebook's opening day on Wall Street does not bode well for the stock's performance in the days ahead, said Channing Smith, portfolio manager at Capital Advisors Growth, which does not own shares in Facebook.

"If you're an investment banker or if you're long the stock, I would definitely be a bit worried as we walk away to the weekend," he said.

The weak IPO may also give pause to private investors in Silicon Valley who have been pouring money into next-generation Internet companies at very high valuations in the hope of eventually taking them public.

MEDIA CIRCUS 

At Facebook's headquarters in Silicon Valley, the day began with company founder and Chief Executive Mark Zuckerberg, 28, symbolically ringing the opening bell for stock trading on Friday morning.

Wearing his trademark black hoodie, Zuckerberg, whose shares are worth nearly US$20 billion and who retains voting control over the company, hugged and high-fived Sheryl Sandberg, Facebook's chief operating officer, who is credited with bringing crucial business discipline to a company founded in a Harvard dorm room.

The area outside Facebook's offices was packed with photographers, more than a dozen television trucks, and a TV news helicopter hovering overhead.

Outside Nasdaq headquarters in New York, crowds also gathered, even as exchange officials struggled to sort out trading problems that left investors guessing whether their buy and sell orders had actually been executed.

The IPO minted thousands of new paper millionaires among Facebook's 3,500 employees - and a handful of billionaires among its founders and early investors. More than half of the proceeds of the IPO will go to existing shareholders, including early backers such as Accel Partners and Russia's DST Global.

In the run-up to the IPO, demand from institutional investors was strong, and many analysts had expected an influx of retail investors keen on owning a slice of a cultural phenomenon regardless of price. But that did not materialize.

"Flippers who waited all day for a pop that did not come decided to throw in the towel and get out," said Mohannad Aama, managing director at Beam Capital Management LLC in New York.

"That group also includes people who over-extended themselves in getting more shares than they can afford to hold - whether they got it from the syndicate or from the open market once it opened around noon."

Still, from Facebook's perspective, the stock performance could be seen as reflecting smart pricing: Zuckerberg and early investors pocketed maximum gains and left little of the easy money on the table.

"You want to price the offering correctly. Institutional buyers get a little bump and the company raises the right amount of money," said Kevin Hartz, co-founder and CEO of Eventbrite, an online ticketing startup that is integrated with Facebook's platform. "If the stock has a massive bump on day one, that means you misread market demand and the company could have raised more money with the same amount of dilution, or could have raised the same amount of money with less dilution."

BATTLE OF THE GIANTS
 
Facebook faces many challenges as it takes its place beside Google, Apple and Amazon as one of the giant public companies defining the next-generation Internet economy. Google in particular views Facebook as a mortal threat and is moving aggressively to integrate social networking features across its products.

At the same time, scores of young companies are building new products and services, in some cases on top of the Facebook platform and in some cases in competition with it, and attracting huge amounts of investment capital.

A handful of such so-called Web 2.0 companies, including Zynga Inc, LinkedIn Corp, Yelp Inc and Groupon Inc, have already gone public, and others have been acquired by the industry giants. All of those stocks fell on Friday in sympathy with Facebook's weaker-than-expected debut.

In an indication of the land grab now under way in the Internet world, Facebook in April spent US$1 billion to acquire Instagram, a tiny photo-sharing company with lots of users but no revenue. A Facebook rival, social scrap-booking site Pinterest, raised money earlier this week at a valuation of US$1.5 billion in a sign that venture capitalists and other private investors still see enormous potential in Web 2.0 companies.

Facebook's formidable assets include 900 million users around the world, many of whom spend hours a day on the site and share enormous amounts of personal information. That in turn enables Facebook to target its advertising to peoples' specific interests, and many analysts believe the huge store of personal information gives Facebook an advantage that Google and other cannot match.

"Literally everything you see on the Internet, you could see inside Facebook -- but done with much more of the social graph built into it," said Siva Kumar, CEO of e-commerce company TheFind. "In a way they operate the mall, and everybody in the mall will pay some way or the other to Facebook."

Facebook posted US$3.7 billion in revenue in 2011 and $1 billion in profit. Analysts say the company has untapped opportunities in mobile computing, and potentially other Internet services such as email and search. Zuckerberg, though unproven as a public company CEO, is widely admired as a product visionary who has done a masterful job in continually improving the Facebook experience.

Skeptics, though, note that only a small percentage of Facebook users respond to advertising on the site. Google retains a big advantage in that regard, because advertising related to specific Internet searches is by nature far more relevant and thus more valuable.

In a sign of the challenges ahead for Facebook, the nation's third-largest advertiser, General Motors Co, said last week that it was canceling its paid advertising on the site.

Global Equities analyst Trip Chowdhry said the stock debut was "lackluster" because Facebook's growth prospects do not justify a high stock valuation. "They have serious technology and business model problems. Facebook is overhyped and drinking its own Kool-Aid," he said. "They are only getting US$4.39 per user per year. Google gets almost US$30 per user."

In Silicon Valley, though, the conventional wisdom is that Facebook and its social media brethren will be an increasingly important force in the business world for many years to come.

Already, the influx of wealth arising from Facebook's extraordinary growth has helped drive a mini-boom in San Francisco Bay Area real estate, and income tax revenues related to the IPO will cut the state of California's budget deficit by an estimated US$2 billion.

4-year-old's hand torn after being pushed down MRT escalator

SINGAPORE - A four-year-old boy was pushed down the escalator at Ang Mo Kio MRT station, causing his left hand to get caught in the escalator and badly injuring it.

The news first broke when Ms Visa Lee, who put up a Facebook post showing a photograph of the boy's hand torn and bloody, called for help sharing the picture to locate witnesses for the accident.

According to reports, Lucas Xie was with his brother and maid going down the escalator when he was shoved from behind.

He lost his footing and landed on his left hand, which subsequently got caught when the steps of the escalator went beneath the floor, The Straits Times reported.

He screamed for help while his hand was stuck for more than 10 minutes, his maid, 29-year-old Tukinem Kasdu said.

The incident happened on Wednesday afternoon at around 4pm. The boy's hand was freed at around 4.20pm. said an SMRT spokesperson.

According to the original Facebook message, the boy - identified as Lee's nephew - required 18 stitches on his left hand, which had a deep gash along his middle finger and another on his index finger. Both fingers were bruised and swollen.

According to ST, the escalator was stopped when a passenger pressed the emergency stop button on the escalator. Another passenger went to alert the station staff.

He was sent to KK Women's & Children's Hospital, which revealed that the accident had also caused a hairline fracture in his middle finger and damaged his blood vessels.

Lee requested her Facebook followers to share the photo so that "witnesses can step forward" to contact them.

"I do not earn anything if you are willing to share. I am hereby begging your help to arrest that horrible person who did this to my little nephew," she said.

She added that the boy is left handed, and the family is worried if he will be able to use his left hand again.

The doctor has said Lucas may lose some mobility in his left hand.

"Imagine the amount of pain inflicted on him, his parents and us," she said.

The family's maid said that a witness to the incident had told her that a man in light blue jeans, red top and a cap had pushed pass Lucas.

The post has since gone viral, and has been posted up on several forums.

Some netizens have suggested that the family of the boy request SMRT to release the surveillance cameras facing the escalators.

Others have questioned the authenticity of the post, and some have even posted comments criticizing the guardian of the child of negligence.

Facebook to make stock market debut in May

SAN FRANCISCO: Facebook will make its stock market debut in May with a record-setting initial public offering of shares, according to a report Wednesday in the Wall Street Journal.

The world's leading online social network has stopped selling shares on the secondary market in order to get a precise count of investors, the Journal said, citing unnamed sources.

Facebook on Tuesday modified its filing with the US Securities and Exchange Commission to warn potential investors that a patent lawsuit against the company by Internet pioneer Yahoo! could deliver a significant blow to its business.

"If an unfavorable outcome were to occur in this litigation, the impact could be material to our business, financial condition, or results of operations," Facebook said in amended paperwork submitted to the SEC.

Yahoo! filed suit against Facebook in a US district court in California on March 12, accusing the company of infringing on 10 of its patents in several areas including advertising, privacy and messaging.

In the suit, Yahoo! said that Facebook's growth "has been based in large part on Facebook's use of Yahoo!'s patented technology."

Facebook in February filed to go public and could raise as much as $10 billion in the largest flotation ever by an Internet company on Wall Street.

The paperwork filed for the initial public offering provided the first glimpse of the financial details of the web giant launched eight years ago by Mark Zuckerberg from his Harvard University dorm room.

Facebook, which is shifting operations to a former Sun Microsystems campus in the California city of Menlo Park, reported net income of $668 million last year.

Revenue nearly doubled to $3.7 billion in 2011, with most of it coming from targeted advertising gleaned from personal information shared by the hundreds of millions of users of the platform.

Facebook -- the leading social network in all but six countries, notably China and Russia -- said it has more than 845 million users including 483 million who log in daily.

Facebook's value has been estimated at between $75 billion and $100 billion.