A Bit of a Red Face under the Hoodie for Facebook

Facebook has to have a bit of a red face, as well as some of  the investment firms they worked with, as  Facebook closed opening day on NASDAQ  at $38.23.  Meaning no first day pop.  Well, a  0.61% pop.  Part of this may have had to do with the market as a whole, as NASDAQ ended up down 1.24%.  Others wrote that     initial trading glitches at the beginning of the day played a part. Facebook is trading under FB.  No confusion with Bulgaria Air, flight code FB, is expected.

The lackluster opening, the highest the stock went was about $43, means individual investors will be able to buy  Facebook stock at the same price shares were offered to privileged investors, wrote USA Today.  Investors who piled in the first day lost as much as 15% in just a few hours.Facebook ended the day with a $104 billion valuation. And  with $16.1 billion in cash. 

The company  never fell below $38 during the day.It touched $38, a lot in the afternoon.  The price likely would have dipped below $38 if the IPO's financial underwriters hadn't moved to help prop it up, said Sam Hamadeh, CEO of the New York analyst firm PrivCo.

CBS News  commented that while the deal was the second largest in U.S. history, after GM,  the first day of trading was more “whimper than bang”.  566 million shares were traded by the end of the day. 

However, what about that lack of pop?  As written about in a previous blog, there is a whole psychology to first day pops, where “the smartest guys in the room” would like to see a pop for the individual investors.  But not too large a pop, because that would signify leaving money on the table (reduces cash available for investments and purchases of hoodies). The   below contains a link to a Wall Street Journal article about this.

Quiz question.  What Bay Area firm had an 89% opening day pop in March?  Annie’s Inc., the maker of organic and natural foods such as bunny-shaped crackers did this on the NYSE.  They trade as BNNY. 

http://kensek.blogspot.com/2012/03/89-first-day-pop-for-firm-going-ipo-on.html

 

Now that they’re public, Facebook will have to be a lot more “visible” to the investment community, and file all those quarterly reports on earnings.  The tradeoff firms make in order to get investment capital with an Initial Public Offering (IPO)!

It could get a bit interesting in November.  Facebook granted Restricted Stock Units to employees (RSU's) to allow them to participate in the growth of the company.  The    RSU's are not counted as shares under securities laws.  So Facebook avoided having to file for an IPO when it hit 500 shareholders.  The downside is that  RSU’s don’t qualify for taxation at capital gains rates (around 15%).  Facebook employees will be looking at a combined state and federal tax rate of 45% on their RSUs.  

Meanwhile, a number of Facebook employees may be leaving work a little early on Friday.  There was an all nighter  event at  Menlo Park  Facebook headquarters, prior to the NASDAQ opening bell  rung by CEO Mark Zuckerberg. Friday morning.

A Range of Pops as Three Silicon Valley Firms go IPO This Week

Three firms in Silicon Valley went public with IPOs (Initial Public Offerings) this week, Splunk, Infoblox, and Proofpoint.  All unprofitable.  All fast growing.Was money left on the table, though, with their asking prices?

Splunk (SPLK) is a “big data” company.  Splunk® Enterprise™ collects, monitors, indexes and analyzes the machine data generated by IT applications and infrastructure--physical, virtual and in the cloud.  This machine data   contains a definitive record of all transactions, systems, applications, user activities, security threats, and fraudulent activity.  This data is largely untapped; Splunk helps organizations analyze this data.  Their growth is in part due to its freemium model.  Their first day pop – 109%, closing at $35.48.  They were up another 2% on Friday. 

Infoblox (BLOX) is in the    automated network control space.   Infoblox products automate the business-critical network services required to connect networks, applications, and people.  Gartner estimates that they have about 40% of the DDI market. DDI equals - Domain Name System (DNS), Dynamic Host Configuration Protocol (DHCP) and IP address.  Network acronym soup, so to speak.  Their only profitable year so far was 2010.  Infoblox   stock debuted on the New York Stock Exchange with the ticker symbol BLOX at $22.57, a 41 percent increase over its late Thursday pricing of $16, , and closed at $21.51.  This was a 34.4 percent pop.

Proofpoint (PFPT) is a   security-as-a-service vendor that delivers data protection solutions that help medium- and large-sized organizations protect their data from attack. They've been around since 2002.  Gartner placed Proofpoint in the Leaders Quadrant in its 2011 Magic Quadrant for Secure Email Gateways.  In their IPO priced its shares higher than their initial range, asking $13 a share from investors.  Shares were first offered on the NASDAQ under the ticker symbol PFPT at $16.85, an increase of 29.6 percent, and closed at $14.08, and 8.3% pop over the initial $13 price.

Splunk would seem to be the winner from the perspective of biggest pop.  The flip side is that the smartest guys in the room doing the analysis should  have had a higher asking price.  

 

You’ve got to look at stories like “The Art of the IPO”, in the Wall Street Journal.  “It's a fine line.  Price your shares too high, and you'll collect a lot of money.  However, the subsequent drop may alienate investors and demoralize your employees.  Price them too low and you'll grab plenty of headlines as your stock soars on takeoff, but you've failed to raise nearly as much as you could have, and the initial buying frenzy may end up costing you some long-term investors.”

http://online.wsj.com/article/SB10001424052970204740904577196792161567410.html

http://www.mercurynews.com/60-second-business-break/ci_20444979/biz-break-24-hours-ipo-success-silicon-valley?source=rss

 

http://news.investors.com/article/608645/201204201811/proofpoint-infoblox-ipos-perform-well.htm