Facebook to test market hunger for IPOS

By Agence France-Presse | Updated: 5 June 2012 01:09 IST

Highlights

After a deep slump that soured many investors on tech stocks last year, Facebook is launching its IPO into a market that looks ready to greet the social networking giant with open arms.

After a deep slump that soured many investors on tech stocks last year, Facebook is launching its IPO into a market that looks ready to greet the social networking giant with open arms.

The rebound in US stocks since their dark July-October quarter has put the key US indices just below their post-crash highs.Although a number of tech stock debuts last year looked like flops within months, most are doing well and in the black since the turn of the year, signaling that the market will likely stomach Facebook's $5 billion capital raising with gusto.

"What's not to 'like' about the Facebook IPO? The social networking king is an advertiser's dream," said Kathleen Smith of IPO investment adviser Renaissance Capital.

Facebook filed the paperwork on Thursday to list its stocks on the market -- though which exchange, the tech-friendly Nasdaq or time-honored New York Stock Exchange, was not yet public.

Listed under the initials FB, the company will immediately become a huge presence. If its recently estimated value of $75-100 billion is reflected in its share price, it would count among the top 40 shares by market capitalization, equal to fast food king McDonalds.

That might not be hard to achieve, given the excitement that has built in advance of the move."Expectations are certainly running high," said Gartner technology analyst Michael Gartenberg."It's hard to think of an IPO in recent memory -- even going back to Google and before that maybe to the Netscape IPO or the Yahoo IPO -- to see this type of frenzy."

He said there was already a high valuation placed on the company in the few shares that had traded outside formal markets, like those sold by employees. "People are starting to wonder, were those values justified? Were they low? Were they high?"

"We'll find out," he said. "What's clear is you're talking about a company that's going to be valued in the multi-billions."The market was generous to some of the top tech firm IPOS in the last year.

Linked In, the social networking website for professionals, went public at $45 in May and on Wednesday its share price was $72.37, up 61 percent -- though well below the $110 peak it hit after listing.

Real estate listing site Zillow hit the market in July with a $20 dollar subscription price and was up 48 percent Thursday.

Discount marketer Groupon was 7.5 percent over its November IPO price of $20. And Zynga, which makes games like Farmville that are played on Facebook, was 6.0 percent above its December IPO.

But some tech IPOs, after initial bursts higher, sank well below their offering price. Popular music streamer Pandora was down more than 19 percent and Internet mass content provider Demand Media's shares sank to 62 percent below the IPO offering.

And Chinese social networking firm Renren plunged to 64 percent below its May IPO subscription price, while Russian social networking operation Yandex was down 17 percent.

Gartner said that if Facebook's listing goes well it could kick off a slew of new tech listings."There are a lot of other companies on the sidelines that are no doubt sitting and waiting to see just how well the market receives Facebook," he said.

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