Perhaps retail investors don’t really have a chance with the Facebook IPO hype, buzz, and frenzy because by the time most of us can even buy one share (~late May 2012), the stock will be live and screaming high on simple supply and demand rules. (If they float 10% of the available shares in the IPO and too many institutional and retail investors want in…. well, you do the math.) Unless you bought some from SharesPost (as an accredited investor), or in your $1M-5M private placement as a Goldman Sachs high net worth customer, most retail investors can’t touch these until they rocket out of the gate at their initial public offering.
What this means is that most investors have already ‘written off’ the possibility of buying any Facebook stock (ticker symbol on the NYSE Euronext: FB). That is until their basic emotions of investment “fear and greed” kick in after the May IPO, and they buy some Facebook stock at elevated levels.
Does that mean that I can’t buy the Facebook IPO?
Well no — you can. Here’s an alternative. The financial services and mutual fund investment company T. Rowe Price bought a nice chunk of Facebook stock for its T. Rowe Price Media and Telecommunications Fund (PRMTX) over a period of a few months in 2011. If you buy that fund now, you can own a bit of Facebook right NOW! Cool…
Mutual Fund Basics and PRMTX Specifics
If you don’t already know, a mutual fund is just a “basket” or group of individual stocks used to spread the risk of single stock ownership. The fund is then valued based on its content and many shareholders buy shares of the basket. Your investment is then pooled with others to buy large stakes in many companies and your risk is (theoretically) reduced by diversification.
The T. Rowe Price Media and Telecommunications Fund is a concentrated fund with up to eighty percent (80%) of its net assets in common stocks of mostly large and mid-cap “companies engaged in any facet of media and telecommunications, including the Internet, publishing, movies, cable/satellite TV, telephones, cellular services, and technology and equipment.” Of course, this fund’s sector/industry concentration reduces some of the diversification.
Buying this mutual fund means owning Facebook stock before the IPO?
Yes, but consider the amounts. The PRMTX fund manager Daniel Martino (at the helm since October 1, 2009) has Apple [AAPL], Time Warner Cable [TWC], AT&T [T], Baidu, Inc ADR [BIDU], Comcast Corp A (CMCSA], The Walt Disney Co [DIS], Google [GOOG], Vodafone Group (VOD), Crown Castle International [CCI], and American Tower [AMT] among his top ten holdings (according to Morningstar’s 12/31/11 data). Each of these ten stocks only accounts for between 4 and 6.25% of the funds holdings. BTW, the objective of the fund is “long-term capital growth” for individuals who seek an “aggressive approach”.
What about Facebook Shares in this T. Rowe Price Fund?
Facebook stock (a total of 507,349 shares actually) appears in their June 2011 Semi-Annual Report of holdings. The acquisition date for those purchases is listed as 3/31 – 5/19/11 with a total acquisition cost $12.6 million, putting their cost basis around $25. Nice price! The value at the time of the report was $14.3 million so their Facebook investment had already shown a gain (that was $28.34 per share). SharesPost halted trading of Facebook on the secondary market last Thursday at $35.50, meaning that T. Rowe Price already made $5.3 million on this slice alone. (Yes, they bought more for other funds, etc. Perhaps over $190 million worth!) Since it’s a $14.3 million dollar holding in a $1.9 billion dollar fund, your exposure to Facebook is tiny. (Less than 1%, maybe closer to .75%). But you would be in Facebook — if it matters that much! (And maybe the fund now holds more, but we won’t know until the annual report…)
The $1.9B T. Rowe Price Media and Telecommunications Fund (PRMTX) has a NAV of $49.88 today (1/30/12), and has a .57% yield and .84% expense ratio. The fund is open to new investors with a $2500 minimum, or a $100 Systematic Purchase minimum (from T.Rowe Price website: Systematic Purchase — “A recurring deposit where the same amount each month is automatically debited from your bank account and is invested in a mutual fund.”). [For reference $2500 would mean about $18 or 19 in Facebook stock exposure... Yikes.]
What’s the Risk Here?
Will they sell their holdings at the IPO? Do you want the other holdings in the fund, etc, etc.? Be sure to do your own research, and consult your own advisors before committing any money to this or any investment. And also be sure you ALWAYS fully understand your investments!
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