NEW YORK – A lot of loyal Facebook fans and occasional investorsare discovering a hard truth this week: Money and connections talk,especially when it comes to a deal handled by Wall Street. The scramble for shares in what is one of largest initial publicofferings in US history quickly divided the haves from thehave-nots on Thursday. Those with big brokerage accounts and a longhistory as customers of Wall Street firms likely got at least partof their orders for Facebook shares filled, but would-be buyers whohad no such ties were lucky to get any. “This is worse than not scoring an invitation to the best party inhigh school,” said Fran Carpentier, 57, a publishing and marketingconsultant in New York City who wanted to get in on the socialmedia company’s IPO but could not figure out how.
Facebook raised about US$16 billion (S$20 billion) on Thursday byselling roughly 421 million shares at US$38 each. That isapproximately half a share for each of its 900 million activemonthly users. Demand for the long-awaited deal, meanwhile, has been surging,helped by wall-to-wall media coverage. Orders for Facebook sharesoutweigh the supply by a ratio of more than 20 to 1, according totraders’ estimates. Aside from wanting the cachet of owning the next big thing,investors are eager to buy something that may deliver big, evenastronomical returns – a rare opportunity in today’s low-yield andturbulent markets.
IPOs often offer an early pop, even if theshares stumble later, and Facebook is seen initially climbingfurther than most. Some analysts expect Facebook shares to rise by as much as 50 percent, or even more on the first day. Facebook and underwriters, as usual, kept mum about overall demandahead of the IPO. Facebook, which will trade under the ticker FB,did not return calls for comment. Aqua Park Equipment
There have been growing expectations in the market that smallinvestors, as opposed to big pension and mutual fund managers, willget as much as 30 per cent of the deal. That’s a bigger chunk thanthe 10 per cent to 15 per cent that is typically allocated toretail investors. It is a result of efforts by Facebook executivesto make shares available to more users. Underwriters are accommodating Facebook’s wishes. But theallocation may still not be nearly enough to meet demand. China Aqua Park Equipment
That puts financial advisers and brokerage houses in theuncomfortable position of not having enough shares to satisfy MainStreet investors clamoring to be a part of the hottest IPO sinceGoogle’s 2004 debut. One of those investors is Mary Furlong, who runs a marketing firmfor baby boomers in Lafayette, California. “I want to buy shares. Imissed the Google opening,” she says, but did not end up gettinghold of any shares. Amusement Park Water Slides Manufacturer
Google, whose founders made “Don’t be evil” a core principle, in2004 issued its stock through a more transparent process known as amodified Dutch auction. Underwriters gathered bids from investorsregardless of their connections or size of their portfolios. That created more of a level playing field for potential investors.Google’s shares were priced at US$85, climbed to US$100 on Day 1and are now trading at about US$623. Facebook is selling its shares through a traditional Wall StreetIPO, a more subjective process, one managed by investment bankers.
“The deal is probably not ‘fair,’ but there’s no way it can be,”said Bruce Foerster, owner of South Beach Capital Markets andformer head of global equity syndicate at Lehman Brothers.”If youdon’t have ties to Facebook management, if you don’t have accountsand an investment history with firms that are co-managing the deal,why should you get any stock?”.