Wall Street Beat: After Facebook Fiasco, Don’t Write off Tech IPOs - hinesthessfy63

The Facebook IPO Crataegus oxycantha have been a fiasco, but don't put the nail in the coffin just still for other tech offerings this year.

The success or failure of tech company IPOs will depend on market conditions, not radioactive dust from Facebook, analysts say.

The Facebook Initial offering was in many ways an anomalous issue, a overt offering of one of the all but-hyped companies ever, winning range against market headwinds. The events specific to the whole mess — which ultimately, with success brought in US$16 billion for Facebook — don't by themselves mean that a technical school bubble has been split.

"An Internet bubble came and went in one day," same John the Evangelist Fitzgibbon, who runs IPO Scoop.com.

"One thing got overlooked in all the hysteria," Fitzgibbon aforementioned. "The stock exchange was not in great shape." Happening the eventide of the IPO, the NASDAQ had reduce from earlier highs of the year, and they are still behind. The tech-gruelling National Association of Securities Dealers Automated Quotations, which closed Friday at 2837.53, cut down aside 1.85, is now about 10 per centum turned previous highs.

Many Factors

Problems with sovereign debt in Europe, fears that Greece will nonremittal and pull back out of the euro, and blended economic reports in the U.S. have set out a damper on stocks lately.

"I've talked with investors and they've been grumpy — things were getting a bit frothy mighty up to the Facebook IPO," aforesaid Canaccord Genuity psychoanalyst Richard Davis.

Meanwhile, a lot went wrong with the Facebook IPO itself, starting with how the offering was conjointly. Facebook picked a half-dozen high-profile investment bankers, led by Morgan Stanley, to see the offering done.

"What if putt way too many another Banks on a enshroud, thereby slice fees to insulting levels for everyone, plainly makes nobody interested or responsible?" asked Davis. "I've aforesaid it before, and true if information technology hacks off issuers, boards, or whatsoever — it is just now inelaborate feebleminded to do IPOs with so many banks on the cover."

The underwriters at the last minute increased the size of the offering and jacked up the oblation price to an astronomical value, compared to what the company actually earns.

Even based on the value of Facebook shares a week after the IPO, down about $7.00 from the initial selling price, the accompany's price-to-earnings ratio is 72.20. Put differently, it costs about 72 times the amount that Facebook is earning per share to buy that contribution. Apple, arguably the most successful company happening the major planet ripe at present, has a P/E ratio of only 13.68. (Facebook's earnings per share are $0.43, piece Apple's are $41.04).

Then, stories from Reuters and the Fence in Street Diary, among others, reported that a Morgan Stanley analyst had cut his revenue figure for Facebook in the years earlier the offering, and may have only if told top clients verbally, rather than spreading the word publicly. If true, this action could make up interpreted as an infraction of business Pentateuch, and at once spokesmen from U.S. House and US Senate committees monitoring the financial sector, as healthy every bit the state of Massachusetts, say they are looking into the matter.

Technical Difficulties

Problems with the NASDAQ ADPS on the day of the IPO made matters worse.

The glitches delayed merchandise notices, and a number of trading firms lost money expected to odd Facebook share prices. Astir 30 million shares' worth of trading were artificial, the exchange estimated.

The multiple underwriters, the price and size of the offer, the technical glitches, not to mention the nature of Facebook itself, all combined to form a perfect storm unlikely to beryllium continual.

"It was a one-time event, a media safety blitz rolled into one with a Wall St. blitz," said Initial offering Scoop.com's Fitzgibbon.

No doubt, the Facebook affray whitethorn put a near-term muffler on tech IPOs from smaller companies and increase examination on earnings results for the twenty-five percent.

"The bungled IPO has redoubled investor skepticism, and this means June quarter shortfalls leave be severely punished and near-terminus hot IPOs more difficult to complete at big valuations," said Canaccord's Bette Davis. "But these are both in effect things."

The point is that ultimately, the Facebook IPO debacle may intend that tech companies teeing up for IPOs this class, and their electric potential investors, volition simply represent more realistic relative to market conditions.

Out of the 173 IPOs in the U.S. finished the past 12 months, 37 stimulate been for tech companies — more for any another sector. And on that point are a number of interesting, up-and-coming tech companies preparing for IPOs this year. Companies mentioned by Stuart Davis and Fitzgibbon let in firewall-maker Palo Alto Networks, marketing automation vendor Eloqua and SaaS supplier Workday.

And while U.S. profitable indicators take up been mixed lately, they tend to set about looking complete in the months before a statesmanlike election, Fitzgibbon said.

In a footnote to the week's financial intelligence, Canaccord's Davis renowned that Ariba's market capitalization — its contribution Leontyne Price multiplied by its number of shares — indisposed at $40 billion 11 years ago. This calendar week, SAP announced it was buying the company for $4.3 trillion.

At the right Mary Leontyne Pric, you can close whatsoever deal.

(Besides see "7 Technical school IPOs That Flopped.").

Source: https://www.pcworld.com/article/464809/wall_street_beat_after_facebook_fiasco_dont_write_off_tech_ipos.html

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