Investors still show skepticism as IPO Facebook nears

YEREVAN, May 14. /ARKA/. Investors and analysts didn’t change their skeptical sentiments around Facebook’s IPO. An initial public offering of Facebook is regarded by many experts as the most expected event of 2012 at internet industry. Facebook's valuation reached $96 billion. However, a number of analysts think that the valuation is too high, even comparing the IPO with the financial pyramid. Criticism around demand for the company’s stock comes fr om Russian and foreign investors.

GREAT CAREFUL INTEREST
“As of now we have received over 400 IPO applications. We can say it’s a high activity, it exceeds the numbers of Russian recent offerings,” Pavel Los, Head of International markets Department for FINAM investment holding told RIA Novosti.
According to him, an average bid is nearly 15,000 dollars whereas minimal bid is 10,000 dollars.
Head of portfolio investments to international markets at FG BCS Sergey Petryakov is even more optimistic.
“The offering raised great interest, applications of over 500 clients have been reviewed. Total pool of money, set by the company, reached nearly 15 million dollars,” Petryakov said.
However, the representatives of other brokerage companies, polled by RIA Novosti, have a different viewpoint.
“There is a demand, indeed, but very circumspect, as there is growing speulations about inadequately high valuation of the company,” Chief of Marketing Department at Zerich Capital Management Viktor Garmashev said.
The company doesn’t announce the number of clients who have applied, as well as the exact number of applications.
Senior analyst at Zerich Capital Management Oleg Dushin told RIA Novosti that it’s hard to consider applications coming from retail clients, and mixing separate orders with the total pool is inappropriate. Moreover, the practice shows that the orders made by Russian clients at this kind of foreign IPOs are processed in the last turn if processed at all.
Aton representative, Natalya Varpetyan, highlighted just indicative interest shown by three-four investors.
According to Alor’s analytical sector head Natalya Lesina, IPO Facebook can be interesting just for institutional investors; in Russia, however, the demand is not high amid them too.
“We think, that retail investors are not interested in IPO, as the Russian market has more attractive securities especially after May tumbles. For example, Gazprom’s high-liquid shares that neared to those of last year’s autumn,” Lesina said.
According to Reuters, demand for Facebook shares has already exceeded the supply due to high interest shown by institutional investors. Bloomberg reports that institutional investors being wooed by Facebook’s IPO roadshow are skeptical about the company’s prospects since ad revenues haven’t kept pace with user growth.
“If institutional investors aren’t sold on the company then the company will rely more on retail investors — those who sell for personal accounts — rather than the former who are made up of banks, insurance companies and pension funds,” the source informs.

WHAT IS FACEBOOK’S VALUATION ?
Russian analysts have also disagreed on Facebook’s fair valuation and an optimal strategy for investors.
BCS experts think that the company’s share will grow after offering in both, short-term and long-term perspective.
Grounding on IPO of Google, Groupon and LinkedIn, Veles Capital analysts say the estimated share price to be 33 dollars, closer to upper offering ben chmark (28-35 dolalrs- edt).
“Taking into account Alisher Usmanov’s message, who owns 10% Facebook via DST Global, that he had been offered to sell his stock at 20% higher price than projected, we expect the investors to buy shares at the price fixed by Facebook,” they point out.
Representatives of other brokerage companies are more careful in reference to Facebook’s stock rise.
Finam thinks large internet companies usually grow after IPO, and the fair share price in this case would be 28.5 dollars.
Alor representative Lesina says that Facebook share prices will actually slip after the offering.
Otkritie company refers to Facebook’s shares as risky investments in long-term perspective. Head of Brokerage personal service department at Otkritie Boris Blokhin said that the prices are dictated by the company’s popularity, however, it may collapse as other large internet companies in the USA. High participation at IPO Facebook is touched off by the company’s popularity rather than rational approach to investments, he added.
Zerich Capital Management expert Dushin said great PR company was organized around IPO Facebook.
“As a whole western investors seem like missing the pyramids’ miracles, that remind of our MMM pyramid. Here wh ere this aspiration to catch a winning ticket comes from,” he added.
The analogical viewpoint was expressed by Investcafe analyst Ilya Rachenkov. He thinks that the skepticism of investors at IPO Facebook roadshow is justified, and the company’s valuation is too high.
“I think that the valuation of the company should amount 46 billion dollars,” he said referring to the website’s migration problem to mobile devices with restricted ad capacity compared to traditional PCs.
“Of course, the experience pushes the investors into disputes, and only time will show who was right or wrong. It all depends on the company’s risk management assessment. The demand for the shares demonstrated by retail investors shows that many of them believe in perfect perspectives of Facebook and are ready to take a risk,” Finam expert Leonid Delitsin sums up, RIA Novosti reports.—0--

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15:14 05/14/2012