Facebook (Nasdaq: FB) Begins Ad Bidding System

Shawshank, VA 6/14/12 (StreetBeat) – In its quest to boost the growth of its digital advertising, Facebook (Nasdaq: FB) is slowly breaking down its walled garden for advertisers.

On Wednesday, the company announced it would begin testing a new advertising mechanism using a technology called "real time bidding," which allows advertisers to place bids on ad space at specific times.

For the new system, called Facebook Exchange, Facebook is working with a number of ad networks that will be able to use cookies in Web browsers to track users after they visit Facebook and show them ads based on their Web browsing habits - a process known as "retargeting."

So a Facebook user who visits a travel Web site to buy airline tickets but does not complete the purchase, may see an ad on Facebook that will allow them to do just that. Facebook is only displaying the traditional thumbnail ads that users see in the right hand column of the page and not other ads like sponsored stories or mobile ads.

The company stressed that it would not share its vast trove of user data with advertisers and that it would not build user profiles to sell to advertisers. Users can opt out of being tracked by any of the third parties by using the privacy settings on their browsers that manage tracking and cookie data collection. They can also opt-out by going to the "About Ads" page on the Facebook Web site.

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Amazon (Nasdaq: AMZN), Google (Nasdaq: GOOG) lead rush for new Web real estate

Northern, WI 6/13/12 (StreetBeat) -- An unprecedented land grab for new Web addresses began in earnest on Wednesday with fierce competition for new internet real estate including .app, .blog and .web from applicants hoping to break the near-monopoly of the .com top-level domain.

The ambitious plan to liberalise internet addresses attracted 1,930 applications, almost half of them from north America, with Web giants Amazon (Nasdaq: AMZN) and Google (Nasdaq: GOOG) applying for dozens of domains including .cloud, .buy and .book.

The liberalisation of top-level domains beyond the fewer than two dozen in existence - dominated by .com, .org and .net - is intended to stimulate competition and innovation by giving organisations more control over their Web presence.

Critics say the new suffixes are unlikely to catch on, and some trademark owners have complained that the move is causing them unnecessary expense - at $185,000 per application plus running costs - to defend their online turf.

Previous small-scale experiments in liberalising domains led to low take-up of suffixes such as museum, .jobs and .travel.

"At the highest level, this is all about creating competition to .com," said Jonathan Robinson, non-executive director of internet registry services company Afilias, which has applied for more than 100 new domains on behalf of clients.

"That's where short, memorable, distinctive three-letter type terms become very interesting," said Robinson, whose organisation already provides key infrastructure for .org, .info and .mobi.

Competing applications were received for 231 domain names. The most popular were .app with 13 bids, .home with 11, and .inc with 12.

Technology giant Apple's (Nasdaq: AAPL) claim to .apple was uncontested by the Apple music label or anyone else.

"The big names of the Internet have either invested massively or not at all," said Stuart Durham, European sales director for Melbourne IT, which has handled 150 applications on behalf of clients.

"There appear to be no applications from Facebook (Nasdaq: FB) or Twitter. There are different strategies in play here and some big gambles."

Just 17 applications were received from Africa, and 116 for names in non-Latin alphabets. Expanding the Internet beyond the Latin alphabet was one of the original reasons behind the liberalisation drive, which began seven years ago.

ICANN will now spend the rest of the year assessing the applications, with contested domains going to auction where more than one party has a legitimate claim. The first new domains are likely to come online in the first half of 2013.

Some critics, including senior figures at Google, have warned that the liberalisation risks effectively privatising the Internet by giving already powerful Web players more scope to control portions of it.

"Our concern is that this could lead to more Facebook-style walled gardens as big brands seek to keep you in their own areas of the Internet," said Stephen Ewart, marketing manager for Names.co.uk, a British domain-name registrar.

"Make no mistake, this change to the domain name world will lead to more competition and consumer choice, but it could also be viewed as a silent privatisation of the Web - for better or worse," he said.

The project is a key test for U.S. non-profit organisation the Internet Corporation for Assigned Names and Numbers (ICANN), whose authority to administer the Web's naming systems is being challenged by emerging nations who say it is too U.S.-centric.

"The plan we have delivered is solid and fair," ICANN Chief Executive Rod Beckstrom told journalists at a news conference in London. "It is our fundamental obligation to increase innovation and consumer choice."

Nations including China, Russia and Brazil are pushing for ICANN's functions to be transferred to a body such as the United Nations, in which governments would have more control.

ICANN is set to net some $350 million from the liberalisation project - about five times its annual budget.

Beckstrom said the organization had priced the applications to cover its costs and that the use of any surplus would be decided by its community - which includes Internet companies, governments and ordinary citizens.

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Options Reveal a Bullish Case for Facebook (Nasdaq: FB): Najarian

Atlanta, GA 6/1/12 (StreetBeat) -- In the off chance Facebook (Nasdaq:FB) shares didn't give you enough bang-for-the-buck in terms of risk, you can now play Facebook via the options market. To help ponder the idea of trading options on a stock that does nothing but fall Breakout welcomed the OptionMonster himself, Jon Najarian.

Like most other market watchers, Najarian is baffled by CEO Mark Zuckerberg and his company going radio-silent after the IPO debacle. The stock has lost 1/3 its value in 10 trading days and Facebook has yet to issue a public statement of any sort, which actually may be for the best.

In that light, FB options are relatively cheap at a volatility of 60. By comparison Facebooks options' vol is about 3x that of Apple (Nasdaq:AAPL) and 2x Google (Nasdaq:GOOG). Another stock with options volatility near that of FB is Research in Motion (Nasdaq:RIMM); a fact certain to irritate fans of either stock.

Whatever the vol, Najarian says $25 strike puts can be had for a whopping $2, meaning they would have no intrinsic value until FB dropped under $23, a full $5 below where the stock was trading at the time of our conversation. "Not a lot of people are betting on the upside right now for Facebook," he deadpans.

There is a bullish case to be made for the shares and Najarian is willing to make it, albeit with atypical caution. With huge trading volumes as the stock fell, outsized demand for puts and other signs of longs getting flushed out "maybe you're getting to some sort of place where finally it's oversold."

If and when such a bounce happens, Najarian says Facebook could make its way back into the $30s by July options expiration. Assuming, of course, the company deigns to grace the market with some sort of comment regarding a revenue plan for mobile and Mr. Zuckerberg returns to the office.

It's not much for the bulls to cling to but given the way FB has traded in its brief history anyone still long should welcome anyone willing to stick their neck out on behalf of the shares.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Facebook (Nasdaq: FB) IPO Fiasco: Here’s How Small Investors Got Rolled Over

Northern, WI 5/24/12 (StreetBeat) -- There is a lot of finger pointing going on about Facebook's (Nasdaq: FB) initial public offering last Friday.

A lot of attention is being focused on the social media giant's Chief Financial Officer David Ebersman, who decided to increase the number of shares offered to investors by 25 percent days before the IPO.The Wall Street Journal writes, "That decision by the 41-year-old Facebook executive may have doomed any real chance the social-networking company had that its stock would jump on its first day of trading—a hallmark of successful IPOs."

As the Facebook IPO rapidly becomes a public-relations and legal nightmare for the company and its Wall Street underwriters, there are legitimate complaints to be made, but laying blame on the CFO is not one of them.

Investors are really frustrated about three aspects of the IPO, which not long ago was being hyped as the deal of the century.

The first problem, a legitimate complaint, was that NASDAQ's computer systems failed on the morning of the deal. This led to many investors being unable to place or cancel stock orders or being left in the dark about whether their orders had been executed. This "glitch" may well have caused some investors to lose money.

The second complaint, which would deserve no sympathy if it weren't for other recent revelations, is that Facebook's stock did not "pop" as much as expected on the first day of trading. Investors have come to expect that such pops are as good as guaranteed on hot IPOs, and they therefore view them as a way to pick up some free money. But of course nothing is guaranteed, and every dollar short-term investors make from a big "pop" is a dollar the company has given away for nothing, so underwriters do a better job for their clients when they price their stocks just under the prevailing market value. In Facebook's case, this initial market value was about 10% above the IPO price, or $42, which is plenty of "free money" for investors.

But then there are the recent revelations, which is that big institutional investors had much better information about the current condition of Facebook's business than small investors did. This revelation may well have played into the modest stock "pop" on the first day of trading, and it may also have caused some would-be long-term institutional investors to jettison Facebook's shares, thus exacerbating the price decline.

The information that big institutions were given was estimates for Facebook's future performance, which were developed by the underwriters' research analysts.

These estimates are verbally distributed in most IPOs, and the institutions use these estimates to help decide on a fair price to pay for the stock. In Facebook's case, however, the underwriters' analysts cut their estimates midway through the roadshow, which is a highly unusual and negative event. They did this because Facebook told them that its business outlook had deteriorated--information that was not given to small investors.

As a result of this estimate cut, combined with an increase in the size and price of the deal and the number of shares sold by insiders, some institutional investors "got the willies" about the Facebook deal. Individual investors, meanwhile, were unaware that anything had changed.

In the wake of these revelations, Facebook's lead underwriter, Morgan Stanley, said that it had followed the rules. And it may have. If Morgan Stanley followed the rules, however, the rules themselves are grossly unfair. Because they allowed big institutional investors to learn just before the IPO that Facebook's business had deteriorated, while smaller investors were left thinking everything was just fine.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Social Media Companies Compared

Atlanta, GA 5/24/12 (StreetBeat) -- Facebook Inc. (NASDAQ: FB), LinkedIn Corporation (NYSE: LNKD), Zynga Inc. (NASDAQ: ZNGA), CrowdGather Inc. (OTCBB: CRWG) and other social media companies have a wide array of valuations in the public markets. In this article, we’ll compare those valuations to determine the most underpriced and overpriced plays in the burgeoning industry.


* Data from Google Finance and Yahoo! Finance; Revenue Growth % for CRWG represents increase in Q3 FY 2012 revenue compared to Q3 FY 2011.

CrowdGather: The Most Undervalued Play

CrowdGather Inc. (OTCBB: CRWG) appears to be the most undervalued play in the sector, with solid revenue growth and a low price-book ratio. Currently, investors can purchase the stock for slightly less than the value of its assets minus its liabilities, and benefit from strong revenue growth that could translate to profitability on the bottom line over the near-term.

Aside from these statistics, the company has also seen a number of other qualitative factors that could make it a good buy. The firm’s CEO, Sanjay Sabnani, has been a consistent buyer of the stock and has even retired a significant number of shares. In fact, the insider’s cost basis for acquiring these shares is significantly higher than the current share price.

From a growth prospective, CrowdGather also has a lot more blue-sky potential. It’s far easier for a $16.88 million company to double its size and deliver outsized investor returns than it is for a $5.1 billion or $92.8 billion company to do the same. As a result, investors may find that this stock has greater upside potential than many other more popular players.


Popular Forums Owned by CrowdGather Inc.

High Multiples Could Benefit Smaller Stocks

Many companies in the social media space trade with lofty price-earnings multiples, such as Facebook’s (NASDAQ: FB) 108.4x and LinkedIn’s (NYSE: LNKD) 604.3x multiples. While these are higher than other tech companies, such as Google’s (NASDAQ: GOOG) 18.44x or Apple’s (NASDAQ: AAPL) 13.84x multiples, they are very positive signs for smaller companies that are approaching profitability.

For instance, CrowdGather is rapidly narrowing its net loss, and with high price-earnings multiples throughout the industry, the company could see its share price significantly higher if it were valued along the lines of the other Internet company multiples once it achieves profitability. And this could mean outsized returns for shareholders.

These multiples are largely driven by recent mergers and acquisitions in the space, such as Zynga’s buyout of the private company OMGPOP at a lofty price or Facebook’s purchase of Instagram for around $1 billion. Meanwhile, venture capital investments at similarly high multiples are also driving valuations higher throughout the sector.

Investing in the Social Media Sector

Many social media companies have experienced strong run-ups in valuation thanks to new IPOs, venture capital investments and M&A. However, some investors believe that these valuations may eventually prove too high to justify, especially in an industry that constantly changes. As a result, investors may be better of seeking undervalued plays with similar growth prospects.

CrowdGather Inc. (OTCBB: CRWG) is an owner and operator of a network of online communities that generate hundreds of millions of page views each month. With a market capitalization of just over $16 million, investors can purchase this stock for less than the value of its net assets and still benefit from the growth in the social media space.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Social media investment bubble has popped

Atlanta, GA 5/22/12 (StreetBeat) – That fizzing sound you just heard coming from Wall Street in the wake of the Facebook Inc. (Nasdaq: FB) initial public offering was the sound of a bubble deflating.

You may have missed it due to the angry shouts of those who have lost big money on the most-hyped stock offering in history, even as Chief Executive Mark Zuckerberg and other insiders are laughing all the way to the bank.

Now that frothy air is accelerating out of the valuations of Internet social media companies, those investors who got in late to the party are worried how bad things might get. Many are selling first and asking questions later.

If you own shares of mutual funds focused on tech or growth stocks, those investors likely include you, unfortunately, since it was institutional money managers who were left holding the bag on Facebook. If you don’t own those funds, pat yourself on the back for avoiding the disappointment that social media investing has produced in 2012.

These stocks are now officially in correction mode.

As of this writing, in the last six trading days, $14 billion has been erased from the combined market caps of Facebook (Nasdaq: FB) , Zynga Inc. (Nasdaq: ZNGA +2.12%), LinkedIn Corp. (NYSE: LNKD +8.47%), Groupon Inc. (Nasdaq: GRPN -1.53%) and Yelp Inc. (NYSE: YELP -1.25%). That’s a 10.4% drop for the sector, which as of Tuesday was valued at $120 billion in aggregate.

Before this month, the sector had mostly tread water as big gains in LinkedIn offset losses in Zynga and Groupon.

Regular readers of this column will remember that last August, I suggested that the value of Groupon had peaked, after the company’s amended regulatory filings showed that its losses were widening despite a 10-fold jump in revenue.

That column came the month after Marc Andreessen, the new rising star of Silicon Valley venture capitalists, said of tech-company valuations: “On a 30-year basis, these things are cheap.”

But few investors have a three-decade time horizon, and the meaning of the word “cheap” isn’t the same for VCs — who get their shares in private transactions — as it is for investors who pay retail stock prices.

Private investors poured $1.4 billion into Internet companies in the first quarter of 2012, according to the National Venture Capital Association. It was the eighth straight quarter that Web startups garnered more than $1 billion, which means Andreessen is far from alone in his bullish assessment.

But with Facebook and the other young Internet companies now all failing to find firm bids in the public markets, it’s just a matter of time before the froth starts to come out of the valuations of private Internet companies as well.

The questions now are: Will the correction become a full-blown bear market? And how much will the social media bubble look like the dot-com bubble?

Fear and greed

As with other bubbles — from tulips to dot-coms — the social media boom was created by greed and inflated by fear.

The greed that started this bubble came from those in the private investment community who — by design, of course — are out to maximize profits. People invest money to make money, after all, so it’s no surprise that VC firms have rushed in to fund so many social media startups.

The fear that inflated it emanated from professional money managers who were terrified of missing out on the “hot” IPOs of the past 12 months; that fear is ironic when you consider these fund managers are, for the most part, playing with other people’s money — in millions of brokerage and retirement accounts — and thus have no real skin in the game.

Now that the VC-fed bubble in social media stocks has met the sharp anger of all those money managers counting up their Facebook losses, look for the public markets to start picking winners and losers in the social media industry. The rising tide that has lifted all social media boats is clearly ebbing.

Companies that can’t produce annual net income despite billions of dollars in annual sales — including Groupon and Zynga — are going to end up as also-rans or takeover fodder at valuations well below their current prices. But don’t grieve for their insiders, who cashed out big even before their disastrous IPOs.

At the same time, there’s a reasonable chance that Facebook and LinkedIn will survive as public companies — given that every new technology market produces two or three winners. (For example, think Intel and AMD in chips; Dell, H-P and Apple in PCs; Oracle, IBM and Microsoft in enterprise software; or Google and Amazon.com in Internet services.)

P/E watch

But it will take both Facebook and LinkedIn a long time to grow into their current valuations.

Based on Tuesday’s closing share price of $34.03 a share, Facebook is trading at about 65 times expected 2012 earnings of 52 cents a share, according to the consensus earnings estimates compiled by Thomson.

LinkedIn is even pricier. At a price of $96 a share, it’s trading at 143 times expected 2012 earnings of 67 cents a share.

Given that froth, even the best of the social media stocks might have much further to fall.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Morning Movers: Facebook and Lowe’s Stumble BIG, Apple in Favor

Orlando, FL 5/21/12 (StreetBeat) -- After a lackluster debut on Friday, shares of Facebook(NASDAQ:FB) fell as much as 13 percent after the opening bell. The social-media giant is now below its initial public offering price of $38 per share, trading in the $33 range this morning.

Krispy Kreme Doughnuts Inc. (NYSE:KKD) shares jumped over 8 percent in morning trading. The company reported adjusted net income of 14 cents per share for the first-quarter. By that measure, the company beat the mean estimate of 8 cents per share. Revenue also increased 3.7 percent to $108.5 million. Chief Executive Officer James H. Morgan commented: “We got off to a good start in fiscal 2013 as operating income rose 11 percent on a 4 percent increase in revenues. All four of our business segments reported improved operating results compared to last year.”

Shares of Lowe’s Companies Inc. (NYSE:LOW) fell 9 percent in morning trading. The home improvement company reported that first-quarter income increased 14.3 percent to $527 million (43 cents per share), compared to $461 million (34 cents per share) a year earlier. However, the company downgraded its full outlook for the year. It now expects to earn $1.73 to $1.83 a share, down from $1.75 to $1.85.

Campbell Soup Co. (NYSE:CPB) shares declined 2 percent early Monday. The company reported that fiscal third-quarter earnings fell 5.3 percent to $177 million (55 cents per share), compared to $187 million (57 cents per share) a year earlier. The company has now seen net income fall in each of the last four quarters.

Apple Inc. (NASDAQ:AAPL) shares surged 3 percent higher in morning trading. An analyst from Piper Jaffray explains that Apple is still on track for an October launch of the iPhone 5. Gene Munster explains, “We believe there is an 80 percent chance Apple will be able to meet our 49 million estimate given the constrained supply. We expect Apple is likely to get favorable treatment in terms of access to 28 nm inventory. Net- net, the worst case scenario is that Apple is unable to meet demand in the short term following iPhone 5 launch and units would shift from the December quarter into the March quarter as we don’t believe consumers would simply purchase another phone in most cases if they wanted the iPhone 5 and it was not available.”

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Facebook Opens at $42.05, GIves Up All Gains at $38.01

Atlanta, GA 5/18/12 (StreetBeat) -- Shares of Facebook (Nasdaq: FB) are being quoted at $45 on Nasdaq before the open of trading at 11 am, well above the $38 offer price.

Actually, the indication has bounced around a little, retreating from $45 at first to $43 and then $42. Stand by.

Sterne Agee’s Arvind Bhatia, who has a Buy rating on Facebook’s shares, and a $46 target, tells me this morning “The price seems like a fair price,” with respect to the $38 offer.

“They could have potentially gone higher given the demand that we’re seeing, but they left some room for upside.”

Now the open has been delayed till 11:10, apparently. The indication has dropped to $42. Playing hard to get. Wedding jitters?

The average price target of 8 analysts surveyed by FactSet is $41.50.

A little light reading while yo wait for a quote: the most recent version of the prospectus.

Bloomberg TV is reporting Nasdaq says it is experiencing delays in opening trading.

The average Facebook estimate for this year is $5.076 billion in revenue and 59 cents in non-GAAP EPS, according to those eight analysts I mentioned. That would be 37% revenue growth and 36% EPS growth.

Headlines are coming from Dow Jones saying traders are “experiencing problems, changing, canceling orders.”

We have a winner: The stock has opened at $42.05, now at $42.49 and rising. That’s an 8% gain, so far. Now backing off to $41 and change.

Down to $40.23 … $40.00. Low so far, according to FactSet, is $38.20.

Video game purveyor Zynga (Nasdaq: ZNGA), which has made much off its money off the Facebook game “Farmville,” was halted by Nasdaq because of a circuit breaker. The stock is down $1.10, or 13%, at $7.17.

The stock’s broken through $40 and is $39.06, a 3% rise.

Sterne Agee’s Bhatia remarks, “I’m a little surprise we’re not seeing a bigger pop. I think it signals the pricing was fair, and from my standpoint it makes it a little easier .. it’s difficult for an analyst if there’s too much froth. I’m almost glad to see the stock not trade in an irrational matter.”

Now down to $38.07, up just pennies! Actually, it went down to $38.00, and is hovering at the $38.01 level.

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Facebook IPO: Wall Street Preps for Heavy Trading Volume

Shawshank, VA 5/18/12 (StreetBeat) -- Trading houses and brokerages expect Facebook’s (Nasdaq: FB) initial public offering, the second-largest U.S. debut ever, to stoke heavy volume in the stock market on Friday.

The social-media giant was to start trading around 11 a.m. EDT on the Nasdaq OMX Group exchange, which has tested its IPO auction systems four times in the past week to make sure the company’s debut will go off without a hitch. Last week, Neil Catania, chief executive of brokerage firm MND Partners, projected that as many as 600 million shares of the stock could change hands.

That would make it the most highly traded initial public offering ever, above the prior record held by General Motors, which saw 458 million shares trade the day of its offering. A 600-million-share volume would also place it in the top 50 trading days ever, excluding trading in Citigroup and Bank of America during the financial crisis.

On Dec. 17, 2009, 3.8 billion shares of Citigroup traded hands, the most ever for a single trading day. Those stocks were trading for extremely low historical prices during their highest-volume days, which made trading large lots relatively cheap. Facebook, on the other hand, priced its offering at $38 yesterday, the higher end of its range.

Traders expect the company’s IPO to rev trading volumes for some time, which would be much welcomed by many in the market after anemic levels of shares changing hands so far this year.

The first quarter of 2012 saw the lowest average volume since 2007, and fell 14.5% from the same quarter the prior year. April was better, but not by much–trading fell 8% from 2011 levels.

One reason for the low volume is that the market has seen fewer initial public offerings. IPO levels are roughly a sixth of where they were in the 1990s, according to Credit Suisse Group. And according to data from Ipreo Capital Markets, they are still in decline. Deals fell year-over-year for January through April.

Sean Kelly, a managing director with Knight Capital Group, said the stock offering could generate some much-needed excitement from retail investors. “If it goes well and people make some money, it could bring the retail investor back into the market,” he said.

However, not all traders are so optimistic.

“I think Facebook is going to be positive for the market,” said Stephen Carl, head equity trader at Williams Capital Group. “I just don’t know how much of a spark it will give overall.”

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Facebook Insiders Limit IPO by Pushing $100 Billion Value: Tech

Orlando, FL 2/23/12 (StreetBeat) -- Facebook Inc. is already trading like a public company as insiders and wealthy investors use private marketplaces to buy and sell stock in the social- networking company ahead of its initial offering.

The shareholder base has grown to more than 1,000, compared with the 50 to 100 investors most companies have when they go public, according to an estimate by Sam Hamadeh, head of research firm PrivCo. Private purchases pushed Facebook’s valuation past $100 billion this month, possibly limiting immediate gains for IPO investors, given that Facebook may seek a $75 billion to $100 billion value.

“Facebook is a blue-chip stock and it’s not even public yet,” said Kevin Landis, portfolio manager for the Firsthand Technology Value Fund in San Jose, California. Facebook jumped as high as $44 this month in private trading, valuing the company at $103 billion and leaving it higher than when Landis bought stock at about $30 to $31 in October. He said he aims to add to his holdings.

While demand for the biggest Internet IPO on record may push the stock even higher when Facebook goes public, private trades through channels such as SecondMarket Inc. and SharesPost Inc. are already making it possible for employees and venture capitalists to cash out. That may have lessened pressure on Chief Executive Officer Mark Zuckerberg to hold an IPO before this year.

Secondary Offering

Facebook, which filed for an initial share sale this month, has yet to set its price range for the IPO. People with knowledge of the matter said earlier this year that Zuckerberg was weighing a valuation of as much as $100 billion.

Larry Yu, a spokesman for Menlo Park, California-based Facebook, declined to comment.

The private trading may make Facebook’s debut more like a secondary offering, where holders sell stock in an already public company, said Barry Ritholtz, CEO of FusionIQ, an equities research firm.

“The people buying now at the IPO price are presuming there’s lots of upside -- I’m skeptical,” said Ritholtz, whose firm is based in New York. “There’s a lot of smart money agitating for the highest possible valuation, and they don’t necessarily have the investing public’s best interest at heart.”

Insiders and investors with $1 million of net worth and a salary of more than $200,000 can qualify to buy stock on private marketplaces, according to U.S. Securities and Exchange Commission rules. In an auction this week on SharesPost, Facebook stock had a clearing price of $42, valuing the company at $98 billion.

Higher Value?

Widely traded private companies that held IPOs in 2011 traded at about 25 percent to 30 percent less than their eventual IPO price in the two months prior to going public, according to Ori Bash, a vice president at Pluris Valuation Advisors. Facebook may see a smaller gain because it has been traded more, owned by larger investors and researched more thoroughly than other private companies, Bash said. It’s also possible the shares will continue to surge, he said.

“If these private-market trades are truly reflective of Facebook’s valuation, there’s a possibility that demand for the IPO shares could drive it even higher than its anticipated $100 billion valuation,” Bash said.

LinkedIn Corp., which had 560 shareholders of record as of April 15, 2011, was valued at $35 a share in private trading in March of that year, two months before the IPO. The company’s initial public offering priced 29 percent higher in May at $45, giving it a valuation of $4.25 billion. Shares more than doubled to close at $94.25 on the first day of trading.

Early Investors Win

The shareholders who got into Facebook earliest --including the hundreds of employees who received restricted stock units as part of their compensation packages -- will see the most gains, said Larry Albukerk, a broker of private securities.

Based on private-market trading, Facebook is “realizing full value at the IPO, which is the goal of all companies,” he said. “They don’t want to leave money on the table. Do the RSU holders and current shareholders benefit? Absolutely.”

Private markets have emerged since the tech boom of the late 1990s and Google Inc.’s IPO in 2004. SharesPost, based in San Bruno, California, began in 2009, and SecondMarket predates SharesPost, offering private share transactions since 2008. Since the start of the service, New York-based SecondMarket’s private-market stock trades have topped $1 billion. Facebook is planning to raise $5 billion with its IPO.

Pricier Than LinkedIn

While the private markets are giving investors a better idea of where the public market prices shares, they don’t completely replicate the Nasdaq Stock Market or New York Stock Exchange, said Landis, the portfolio manager.

“The idea that it should give you the perfect indication on price -- i.e. there would be zero bounce because it’s perfectly priced in -- I’m not sure I’d buy that,” he said.

Facebook’s sales surged 88 percent to $3.71 billion in 2011, according to the IPO filing, and may climb to $6.1 billion this year, EMarketer Inc. estimates show.

At $100 billion, the company would be valued at about 27 times last year’s sales, almost double the 14.5 times trailing 12-month sales at which professional-networking service LinkedIn Corp. went public in May. It’s almost triple the multiple of 9.8 times implied by online coupon-company Groupon Inc.’s IPO price in November, and four times social-gaming provider Zynga Inc.’s multiple of 6.8 times at its December IPO, Bloomberg data show.

Facebook has 1,070 Class B shareholders based on its latest filing, almost double the tally for LinkedIn ahead of its IPO, according to regulatory filings.

“Arguably, given the number of investors that are already in Facebook, that IPO has already occurred,” Mark Mahaney, an analyst at Citigroup Inc., said in an interview on Bloomberg Radio this month.

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