Timur Emek / AP
The Facebook logo on a computer screen is shown. Now that Facebook has declared what it thinks the company is worth, it's time the company to hit the road and convince investors.
By Roland Jones
Now that Facebook has declared what it thinks it?s worth, it?s time for?company executives to hit the road and convince investors.
On Thursday?Facebook filed a document with regulators?setting a price range of $28 to?$35 per share?for its initial public offering of stock,?valuing the company at up to $96 billion and setting the stage for the biggest-ever Internet IPO.
The filing starts the period during which Facebook?s executives will meet with?key investors?to persuade them, ahead of an expected May 18 IPO, that the social media network deserves the?high valuation. It would make Facebook the most valuable U.S. technology company at the time of its?IPO, far?ahead of Google?s $23 billion valuation in 2004.
Facebook executives met with major underwriting banks involved in the deal Friday, including JPMorgan Chase, to brief them on the IPO presentation.
In those meetings with bankers, known as??teach-ins,??company executives?go over the talking points for its IPO ?roadshow,? in which company executives present their case to?analysts and potential investors in various cities. The Facebook roadshow is?expected to begin as early next week.
Facebook executives led by founder, chairman and chief executive Mark Zuckerberg reportedly will hit New York, Boston, San Francisco, Chicago, Baltimore and possibly Los Angeles in the nine-day roadshow.
?A company will aim to visit the major financial centers in the U.S., and possibly overseas,? said Kathleen Shelton Smith, co-founder and chairman of IPO research company Renaissance Capital.
?These events typically happen in the form of luncheons,? Smith said. ?They?ll be getting the word out to investors about the company, telling when they plan to price the IPO, and some of the larger investors may tell them how many shares they would want to buy and how much they?d be willing to pay.?
For a taste of what the presentation will be like, you can watch a 31-minute video published Thursday by Facebook, starring Zuckerberg and described as a "retail roadshow."
Underwriting banks will use feedback they gather during the?roadshow to determine the offering price. That is the price that will be paid by favored investors, typically hedge funds, big institutions and wealthy individuals, at the time of the offering, currently estimated for the evening of May 17. Members of the general public would get their first chance to buy the shares the next day when trading opens, presumably at a higher price than the initial offering.
Facebook is expected to trade on the Nasdaq market under the symbol "FB."
While Facebook is expected to get a big opening-day "pop,"?Smith said it?s more important to track what Facebook?s stock price will be one week or a month after its initial trading day, Smith said.
?For an IPO to work it has to trade higher over time after the initial trading day, and not all of them do,? said Smith. ?So the challenge for the underwriters is to price the IPO where the it can move higher over time.?
?The question is, over time will the company deliver the kind of performance that justifies its price? Every investor studying this company wants to work that out.?
Will small investors -- you and I -- be able to buy into the Facebook IPO? It?s not usually easy for individual investors to buy into hot new stock offerings, notes Smith.
First, a potential investor would need to open an account at one of the 33 underwriting banks, led by Morgan Stanley, JPMorgan Chase and Goldman Sachs. (You can find a complete list here.)
Unless you are one of your stock broker's favorite customers, you probably don't have much of a chance of getting Facebook at the IPO price.
A more realistic option could be to invest in mutual funds that track the IPO market, such as the Direxion Long/Short Global IPO Fund (ticker: DXIIX), or the Renaissance Global IPO Plus Aftermarket Fund (ticker: IPOSX), Smith said.
However, one ray of hope is a New York Times report that says Facebook executives and underwriters have discussed raising the number of shares that will go to retail investors. the newspaper said Wall Street executives estimate that the retail share could be as much as 20 to 25 percent of the offering, and some of that increase is likely to go to brokerage firms that cater to small investors, such as E-Trade, which Facebook recently added as one of its underwriters.
Facebook is making the rounds today ahead of its roadshow starting on Monday, with CNBC's Kayla Tausche. James Lee, CLSA internet analyst and Mark Mahaney, Citigroup managing director of internet research, discuss how to play Facebook, Yahoo and other ...
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