Canadian Facebook fans unlikely to scoop up shares

Canadian Facebook fans may share everything from pictures of their meals to engagement announcements on the social networking site, but they’re unlikely to get in on its hotly-anticipated initial public stock offering.

Canadian Facebook fans may share everything from pictures of their meals to engagement announcements on the social networking site, but they’re unlikely to get in on its hotly-anticipated initial public stock offering.

Scooping up shares is an exclusive privilege when any big-name company first goes public — and given the hype surrounding Facebook Inc.’s public launch, it’s going to be even more difficult for average investors to get their hands on the offerings at the initial price.

And to make matters more frustrating for Canadians, the company’s underwriters — those responsible for doling out the limited number of shares — Morgan Stanley, JPMorgan Chase and Goldman Sachs, grant access only to the biggest of Canadian players. There are few Canadians or Canadian firms wealthy enough to have an account at the American investment behemoths.

The company said in its sprawling 200-page prospectus, filed Wednesday with the U.S. Securities and Exchange Commission, that it plans to raise an initial $5 billion — the most for an Internet IPO since Google Inc. raised $1.9 billion in 2004.

The entire California company could be valued at US$100 billion or even more, depending on the market reaction to its stock sale.

Facebook did not indicate an initial offering price, which will be determined by underwriters depending on the level of interest, but it has been estimated at between $30 to $35 per share.

That leaves about 167 million shares in circulation, which scarcely covers intense demand for the world’s biggest social networking website.

“They’re only going to give it to their biggest, best client and even they’re going to get very, very small amounts,” said John O’Connell, CEO at Toronto-based money manager Davis Rea.

Investment advisers, who usually receive fewer shares than they want of a stock that’s in high demand, distribute those shares among their clients.

By the time Facebook shares actually hit the public stock market, in about three months, the price is expected to at least have doubled from the initial asking price — causing even more investors to want to jump on board.

“Nobody’s going to get everything that they want, so some people will decide to flip it for a quick profit and some will decide to buy more,” O’Connell explained.

Investors need to look beyond the hype and focus on whether the company’s books justify its valuation.

O’Connell warns that traders have lost a lot of money by buying into similarly hyped public offerings that inflate stock prices at companies that later tanked.

“It’s amazing that so many people want to buy this thing and they don’t know anything about the company’s financials — that says a lot about investors’ thought processes.”

“Some of these stocks change at huge, huge premiums initially and oftentimes they tend to drift lower over time because investors start taking a very sober second look at what the business is all about.”

The regulatory filings showed what analysts have long suspected — that Facebook is very profitable and growing. The company Mark Zuckerberg started in a Harvard dorm in 2004 has seen its annual revenue soar from $777 million in 2009 to $3.7 billion last year. Facebook’s earnings have grown at a similar rate too, ballooning from $122 million in 2009 to $668 million last year.

Facebook ended 2011 with $3.9 billion in cash. That’s a relatively small amount compared to the nearly $45 billion that Google has in the bank and peanuts compared to Apple’s nearly $100-billion stockpile.

Facebook ended last year with 845 million users, up 39 per cent from 608 million at the end of 2010. The company generates about $4.39 in revenue per user.

Facebook is just the latest tech company to make an eagerly awaited IPO in the last year.

The early crop has included Internet radio service Pandora Media Inc., professional networking service LinkedIn Corp. and daily deals company Groupon Inc. Most of those Internet IPOs haven’t lived up to their lofty expectations. The list of disappointments includes Zynga Inc., which has built a profitable business by creating a variety of games to play on Facebook. Zynga’s stock fell five per cent below its IPO price on the first day of trading.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
All adult Albertans to be offered first dose of vaccine by end of June: Premier

Alberta’s premier says the province will be “back to normal” when 72… Continue reading

Black Press Media file photo
Alberta doctors say trust must be rebuilt after proposed new labour deal rejected

EDMONTON — The head of the Alberta Medical Association says many factors… Continue reading

Security and police block the entrance to GraceLife Church as a fence goes up around it near Edmonton on Wednesday April 7, 2021. The Alberta government has closed down and fenced off a church that has been charged with refusing to follow COVID-19 health rules. Alberta Health Services, in a statement, says GraceLife church will remain closed until it shows it will comply with public-health measures meant to contain the spread of the novel coronavirus. THE CANADIAN PRESS/Jason Franson
Expert says gathering outside Alberta church attended by many conspiracy theorists

SPRUCE GROVE, Alta. — An expert investigating hate groups says a weekend… Continue reading

Interior Health nurses administer Pfizer-BioNTech COVID-19 vaccines to seniors and care aids in Kelowna on Tuesday, March 16. (Phil McLachlan/Kelowna Capital News)
Canada set to receive 1M Pfizer-BioNTech doses, Moderna playing catch-up

OTTAWA — The federal government is expecting Moderna to make good on… Continue reading

This satellite photo from Planet Labs Inc. shows Iran's Natanz nuclear facility on Wednesday, April 7, 2021. Iran's Natanz nuclear site suffered a problem Sunday, April 11, involving its electrical distribution grid just hours after starting up new advanced centrifuges that more quickly enrich uranium, state TV reported. It was the latest incident to strike one of Tehran's most-secured sites amid negotiations over the tattered atomic accord with world powers. (Planet Labs Inc. via AP)
Iran blames Israel for sabotage at Natanz nuclear site

DUBAI, United Arab Emirates — Iran blamed Israel on Monday for a… Continue reading

Minister of Public Safety and Emergency Preparedness Bill Blair responds to a question during question period in the House of Commons on Parliament Hill in Ottawa on December 11, 2020. THE CANADIAN PRESS/Patrick Doyle
New regulator to stop sexual exploitation of children online: public safety minister

OTTAWA — Public Safety Minister Bill Blair says the government will introduce… Continue reading

Gordon Greenwood Elementary Grade 7 students were assigned to write about climate change. The Langley Advance Times is pleased to present a selection of their writings. (Sasha/Special to the Langley Advance Times)
Canada’s greenhouse gas emissions increased slightly in 2019: report

OTTAWA — A new report shows Canada’s greenhouse gas emissions increased slightly… Continue reading

Conservative leader Erin O'Toole holds a press conference on Parliament Hill in Ottawa on Tuesday, April 6, 2020. Top Tory leaders of past and present will speak with supporters today about what a conservative economic recovery from COVID-19 could look like. THE CANADIAN PRESS/Sean Kilpatrick
O’Toole to vote against Conservative MP’s private bill on ‘sex-selective abortion’

OTTAWA — Conservative Leader Erin O’Toole says he will vote against a… Continue reading

Eugene Kwon of Gratia Bakery and Cafe says the business will be relying on take out orders and a small patio. (Neil Corbett/The News)
Small business struggling amid COVID-19 pandemic looks for aid in Liberals’ budget

OTTAWA — A group representing thousands of the country’s small businesses says… Continue reading

Ron Howard is photographed at the "Inferno" film premiere on Oct. 25, 2016 in Los Angeles. (Buckner/Rex Shutterstock/Zuma Press/TNS)
Brothers Ron and Clint Howard have memoir coming in October

NEW YORK — Filmmaker-actor Ron Howard and actor Clint Howard, brothers, former… Continue reading

FILE - In this Saturday, March 27, 2021 file photo, Buffalo Sabres’ Taylor Hall plays against the Boston Bruins during the second period of an NHL hockey game, in Boston. The Buffalo Sabres could trade 2018 MVP Hall, who signed for just this season and is a pending free agent. (AP Photo/Michael Dwyer, File)
Boston Bruins acquire Taylor Hall to kick off NHL trade deadline day

Trade deadline day in the NHL has started with the Boston Bruins… Continue reading

The Huawei logo displayed at the main office of Chinese tech giant Huawei in Warsaw, Poland, on Friday, Jan. 11, 2019. Poland’s Internal Security Agency has charged a Chinese manager at Huawei in Poland and one of its own former officers with espionage against Poland on behalf of China. (AP Photo/Czarek Sokolowski)
Huawei, HSBC agree on document deal for extradition case

HONG KONG — Chinese telecommunications equipment firm Huawei said Monday that it… Continue reading

The Montreal Police logo is seen on a police car in Montreal on Wednesday, July 8, 2020. THE CANADIAN PRESS/Paul Chiasson
Hundreds defy Montreal’s 8 p.m. curfew in violent, destructive protest

MONTREAL — Hundreds of protestors gathered in Montreal on Sunday in defiance… Continue reading

Most Read