Skepticism, Frenzy in Facebook IPO

Skepticism, Frenzy in Facebook IPO

Facebook Inc.'s coming initial public offering has set off a frenzy of anticipation among Main Street and Wall Street investors desperate to get their hands on the stock.

Late Monday, the social network raised the price range for its IPO to $34 to $38 a share, from $28 to $35 a share, said a person familiar with the matter, in a sign of investor appetite for the offering. The Menlo Park, Calif., company's initial price range put Facebook's valuation at $77 billion to $96 billion, but that rises to $93 billion to $104 billion under the new price range, said the person familiar with the matter, as investor interest ramps up.

Those numbers have created high hopes for both individual and professional investors. The excitement has drawn in fledgling stock buyers such as 11-year-old Jade Supple of Rockville Centre, N.Y., whose father plans to bet money saved to put his daughter through college on Facebook shares, although he has doubts about the price.

In Berwyn, Pa., hedge-fund manager and mutual-fund manager Chris Baggini of Turner Investment Partners says he tracked Facebook closely and repeatedly called executives at Morgan Stanley or Goldman Sachs, which are helping to lead the IPO, to snag a spot in the social network's roadshow stop in Philadelphia last Wednesday.

Across the nation in El Cajon, Calif., technology teacher and investment-club supervisor Todd Benrud is trying to get his club at Grossmont High School into Facebook stock. "They use Facebook every day," Mr. Benrud said. Some students think it is "guaranteed to make money."

Sophisticated investors who can meet financial requirements have been able to trade limited shares of Facebook for some time on secondary markets. But the IPO will turn Facebook into a public company that anyone can own.

Many small investors are eager to grab Facebook at its issue price, hoping the shares will surge in value as IPOs frequently do on the first day. But Internet IPOs have had mixed success. Daily deals website Groupon Inc. has lost about 35% of its value since its Nov. 4 debut, while stock at professional network LinkedIn Corp. has gained nearly 150% since it started trading May 19.

Facebook still hasn't proven that its $3.7 billion in revenue and $1 billion in profits last year deserve such a lofty valuation. Last month, the company disclosed that its first-quarter profit and revenue declined from the fourth quarter of 2011, which it attributed to seasonal trends in advertising. A Facebook spokesman declined to comment.


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