A lot of speculation exists on the web about the date of the planned Facebook IPO. Although their possible initial public offering has been moved many times before, now that they have passed over 500 shareholders, they really must make a move in 2012 and the best guesses have been between April and June. Some rumors online at various sites (including All Things D and Mashable) peg this historic internet IPO ($100B possible valuation!) for late May, which makes sense. Why?
Why a Facebook IPO in May of 2012 Makes Sense?
If this is a huge, historic, ground-breaking, earth-shattering and expensive IPO as it should be with a $10B float on a $100B valuation — then this will be time for many investment bankers and insiders to get very wealthy, very quickly. And Wall Street — known for its slow trading summers has a saying: “Trade in May and Go Away”. What this says to me is that the principals and decision makers of many of these large firms will want to make critical decisions, trades, investments, or changes to their Facebook holdings — and potentially make a killing — before they wander off for their summer leisure activities. And if the IPO is over-subscribed – as it should be — the stock could fly out of the gate and become very expensive (per share and based on valuation) very quickly. If institutional investors, traders, hedge funds, and others want to make huge trades on the Facebook IPO, they need it to happen when senior risk managers and decision-makers are around to give them the greenlight.
The other factor is that decisions need to be made — after seeing the IPO prospectus, and watching how the initial public offering goes down, whether the underwriters take additional shares at the IPO price (!!!), often with an underwriter discount — and for other institutional investors — how much Facebook stock to hold to show for quarter’s end holdings in June. This is escpecially important depending on the public’s perception of the Facebook IPO. What money manager, or mutual fund investment team wants to look like they missed the biggest IPO in years? Every summer update to holdings will boldy claim that “yes, Mr. and Mrs. Main Street — our intelligently managed fund (or ETF) holds some Facebook stock — buy this and you’re in the game!” If only it could be that simple!
Conclusion: Could the Facebook IPO Be Later?
So May 2012 makes sense, and it works nicely with the cycles on Wall Street. Plus it could provide some great summer banter on those worldwide yacht charters: “how did you do on the Facebook IPO?” If a black swan event, or the resurgence of European debt fears takes center stage — I wouldn’t be surprised to see the IPO delayed to late August or September — but not October… Wall Street’s kind of superstitious about that month.
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