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.

Just Posted

Updated: Hunting Hills High School student sentenced for making online threat

16-year-old gets a conditional discharge with 12-month probation and 50 hours of community service

Butcher stabbed Johnston in self-defence, lawyer says in closing argument

HALIFAX — Nicholas Butcher was acting in self-defence when he stabbed Kristin… Continue reading

Federal government finalizes regulations to reduce methane emissions

CALGARY — The federal government said Thursday it has finalized regulations that… Continue reading

Man charged with sex offences aiming to resolve charges

Stuart Peter Hunt is facing more than dozen charges related to child sexual exploitation offences

$25-a-day child care program expanded

More affordable child care spaces in Red Deer

WATCH: Thousands of high school students visit Red Deer College for CAREERexpo

The eighth annual CAREERexpo was held at RDC Thursday

Grief over deadly Toronto van attack sinks in days after rampage

TORONTO — Grief over the deadly van attack that took place on… Continue reading

Riggers looking forward to another trip to Nationals with season on the horizon

Season opens on May 15 against the Confederation Park Cubs

Update: Pilot likely disoriented in plane crash that killed former Alberta premier

CALGARY — The Transportation Safety Board says the pilot of a plane… Continue reading

What’s new on Netflix Canada, CraveTV in May

A monthly look at what’s scheduled to be added to the catalogues… Continue reading

Air Canada offers to help passengers stranded by a possible pilot strike

MONTREAL — Air Canada has turned the tables on WestJet by taking… Continue reading

Blackfalds drops front licence plate advocacy efforts

The Town of Blackfalds is no longer pursuing mandatory dual licence plates… Continue reading

How the government hopes to strengthen intellectual property in Canada

OTTAWA — The federal government has unveiled new measures on intellectual property… Continue reading

Innisfail solar project could be powering 4,000 homes in 2019

The Town of Innisfail will soon be home to a solar farm… Continue reading

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month