Video

From the Floor: Yen and gold dip as Abe wins big —#SaxoStrats

Japanese prime minister Shinzo Abe's weekend election victory is the headline-maker this morning with both the yen and gold trading lower as his strengthened majority is dulling the appeal of these traditional safe havens.

4d Why I'm selling DAX: O'Hare

15

2
4d From the Floor: Equities strong, Dax bias 'still to the upside'

0

5
5d From the Floor: Sterling at a crossroads, China in focus — #SaxoStrats

0

4

Article / 17 May 2012 at 7:20 GMT

Facebook IPO: if you got it, lucky you, if you didn't, stay out

Matt Bolduc

Equity Analyst

Denmark

If you were lucky enough to get a piece of the Facebook IPO, congratulations. If you couldn't get any of the IPO shares, stay out until the insanity dies down as many investors will try to get in regardless of cost. This was echoed by Steve Wozniak, co-founder of Apple, who said he would invest in Facebook at any price.

If we look back at the most recent technology IPOs, on average, investors were strongly rewarded once the stocks started trading - average basket gain of 45 percent on the first day of trading. The same cannot be said for investors who got in after the first day of trading. If you had bought the same basket the day after the IPO, you would have lost 7 percent compared to the 34 percent gain you would have had if you had the IPO shares. That's quite a difference - 41 percent! Therefore if you had the IPO shares, good for you, and if you didn't, well that wasn't good.

IPO basket

The same results can be found by tracking the IPO performance through 1, 3 and 6 months. So what is the history lesson here? Basically if you have or had the opportunity to get in on the Facebok IPO you stand to make a nice, quick chunk of change otherwise you should probably wait until the hysteria dies down.

2nd day basket

The tell-tale sign that Facebook is going to skyrocket on the first day is that the investment bankers have increased the pricing range of the IPO as well as the allotment. This means that there is plenty of pent up demand for the IPO - a lot of demand that will have to be satisfied once the stock finally trades. In this case, the valuation and the fundamentals simply do not matter in the short term, this is a pure 'greater fool theory' trade.

So if you were looking to get into Facebook and couldn't get some IPO shares, do fight the urge to get in on the first day. Let cooler heads prevail, and wait for the price to come down, this isn't a guarantee but if historical probabilities are correct, it could save you a lot of money.

P.S. Just for fun, I will 'predict' that Facebook should easily gain 30-40 percent on the first day....

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1