Advisers on FaceBook IPO: Yawn

But there are some backdoor plays that might make sense for clients

Apr 2, 2012 @ 4:07 pm

By Jeff Benjamin

As public stock offerings go, it appears that Facebook Inc. is about to hit an epic home run. But financial advisers are less pumped up than their clients.

According to an ongoing survey of financial advisers being conducted by InvestmentNews, few advisers are as enthusiastic about the Facebook IPO as their clients.

Sixty-five percent of the advisers surveyed said their clients are inquiring about investing in the Facebook IPO, but 80% of the respondents said they are not recommending the stock to their clients.

In terms of Facebook stock's ultimate performance, more than 55% of the advisers said they believe it will outperform Google, which has gained more than 660% since 2004.

“Right now, all the stars are lining up and it's going to be a very hot IPO at a time when the IPO market in general is already hot,” said Josef Schuster, chief executive of IPOX Capital Management LLC.

The stock sale is tentatively scheduled for the second week of May but pre-market activity has already pushed Facebook's market capitalization to more than $102 billion.

According to published reports, early trading is valuing the company at more than 100 times last year's earnings and 50 times its estimated earnings for next year.

The IPO is expected to raise more than $5 billion. By comparison, the 2004 Google IPO raised $1.9 billion when it went public at $85 a share. Google stock is now trading at nearly $650 a share.

Market watchers like Mr. Schuster say that the hype and momentum behind the Facebook IPO ultimately could push the company's valuation as high as $130 billion.

“It's a big brand name, there's a lot of pent-up demand in the IPO space, the appetite for risk is high, and these kinds of IPOs are typically underpriced,” he said.

Because only about 5% of the company's total shares are being offered at the IPO price, investors would be better off waiting until after the public offering to buy, Mr. Schuster said.

Unless you're a really big client at a major brokerage firm that can provide some shares at the IPO price, investors might have to resort to something like GSV Capital Corp. Ticker:(GSVC), Mr. Schuster said.

GSV is a closed-end fund that invests in venture capital-backed private companies and has some exposure to pre-IPO Facebook stock.

After the IPO, some registered funds will have exposure to the stock, including the First Trust U.S. IPO Fund Ticker:(FPX), an exchange-traded fund managed by Mr. Schuster.

The ETF invests in the top 100 IPOs and corporate spin-offs by market cap, and holds them for four years following the IPO.

Investors should also expect to find some Facebook exposure in the Global X Social Media Index ETF Ticker:(SOCL), which is pegged to social media investments.

Follow Jeff Benjamin

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

How interest rates have affected different types of insurance

Social media and engagement editor Scott Kleinberg and reporter Greg Iacurci discuss a common theme in this week's popular insurance stories.

Latest news & opinion

Joe Duran has a game plan, and anyone can play

The CEO of United Capital built a formula for holistic financial planning that any firm can tap into — for a price.

LPL video about private equity looks like a swipe at Cetera

Recruiting video warns about potential consequences for advisers when a PE firm buys a broker-dealer.

Ladenburg chairman Phillip Frost steps down

The SEC charged Frost with fraud earlier this month.

Envestnet Tamarac partners with Schwab, TD on digital account openings

Auto-filling documents designed to make onboarding more efficient for RIAs and more convenient for clients.

Wells Fargo plans to cut staff up to 10% within next three years

Bank is struggling to cut spending amid regulatory fines and higher legal costs stemming from scandals.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print