Another Facebook exorcet

It is clear the Facebook IPO is going to get more and more messy.

It has come to light that Mark Zuckerberg unloaded 30.2 million shares on day one and banked $720 million. By the end of trading 3 days later the stock had slumped as we all know saving Marky boy $111 million had he had the good grace to wait a few days. The new word in the US for investors who lost out is ‘zucked’ as in you have been….

The  bigger question now comes from a serious analyst firm called StarMine, a Thomson Reuters division, whose claim is “Gain unparalled insight into equity data”. They have put a price on the stock at $9.40, which is a market cap of £25.7 billion. For any private investor this must be a shocking assessment from a leading independent analyst. If anywhere near the reality a $100,000 investment would be worth $24,737.

The Paul Simons Casio calculator arrived at $7.60 per share, or a market cap of $21.8 billion. I’m quite relieved a proper firm has come up with a valuation in the same ball park. My efforts took about an hour reviewing the IPO filing and then doing some basic maths. Goodness knows the level of fees Morgan Stanley charged to figure out an offer price of $38.

I have to believe they know stuff we don’t know otherwise how can StarMine have such a massive difference of opinion on the value of Facebook – they all do the same job and get paid shed loads accordingly. I’m in the wrong job!

Image: http://www.flickr.com/photos/jdlasica/7985194652


3 Responses to Another Facebook exorcet

  1. rob jenkins says:

    paul, i think there is another factor in play in the IPO that hasn’t been present in previous big tech IPOs. The new(ish) secondary markets in pre-IPO shares.

    I could be wrong but I think this is the first time that services/sites such as second market – https://www.secondmarket.com/ – have had an influence on the price.

    If you scroll horizontally through this – https://www.secondmarket.com/facebook-on-secondmarket/ – you can see that since april 2008 FB has been traded by hedge funds, asset managers and soverign wealth funds. The type of enterprises are (i imagine) all very good Morgan Stanley clients. .

    On the secondary market the stock has been trading at over $30 per share since at least Jan 2011. Not wishing to be a conspiracy theorist but I’d imagine that it would be hard for Morgan Stanley to price the IPO at less than it is being traded in the secondary market as some of their best clients (or prospective clients) would lose out on the shares they have already bought pre-IPO?

    • Paul Simons says:

      Thanks Rob, all very helpful and it will be fascinating to see all of this unfold in the coming weeks.

  2. Mal Gordon says:

    Rob raises an interesting point. It would be far easier to pump a pre-IPO stock up in a highly illiquid pre-IPO marketplace lacking in transparency. Invest a couple of million to inflate a stock’s IPO price potentially by billions could be a nice little earner if you’re in a position to do so.

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