Facebook IPO? Most Stock Jocks Say ‘No’
Managing Editor, CNBC.com
Are most stock investors buying into the Facebook initial public offering story? Not really, according to a new poll from CNBC and the Associated Press.
Nearly two-thirds of active stock investors think Facebook is going to be overvalued when it goes public this week, according to the AP-CNBC poll.
Among Americans generally, half think a Facebook valuation of nearly $100 billion — a market capitalization that would make it larger than Ford Motor, but smaller than Google — would be too high.
The results reflect what seems to be some growing caution among the public about high-flying technology IPOs. Recent debuts from tech outfits such as Pandora Media and Groupon have ultimately turned out flat. Indeed, some professionals are warning mom and pop investors away from such offerings.
“I’m very concerned by the public’s over-exuberance," said Alan Patricof, founder and managing director at investment firm Greycroft Partners, during an appearance on CNBC’s “Fast Money.” He said the pervasiveness of Facebook has led people to become too enthusiastic about the company, a situation that will in turn lead to unsustainable gains for the stock when it starts trading.
Apparently, large parts of the investing public are already on guard, according to the results from the AP-CNBC poll — conducted from May 3 through May 7 with a sample size of 1,004 participants ages 18 and over.
- Among active investors, or those who have made changes in their holdings in the last month, 62 percent say they think Facebook will be overvalued. Only 27 percent of those polled think it will be fairly priced and 5 percent believe it will be undervalued.
- Those who invest in the stock market are more likely than those who do not to say Facebook would be overvalued; 58 percent said so, compared with 45 percent of non-investors.
- Among investors, 28 percent said it will be valued fairly by the market, and 3 percent said it will be undervalued.
Not all the perspective is negative, however.
Indeed, about half of those polled (51 percent) said Facebook stock would be a good investment, while 31 percent said it would not be so good.
These results are in line with reports that the Facebook IPO is already oversubscribed and that the company and its underwriters are considering upping the price range. (Update: In fact the company did up the price range shortly after this story was initially published).
And tech sector observers point out that regardless of the short term performance, the key is considering Facebook as an investment over time.
“There is a huge demand for Facebook shares. There is no doubt this is going to be a top end of the valuation or above success for them,” Rupert Goodwins, editor of ZDNet, said during an interview on CNBC’s “Squawk Box Europe.” “There will be no problem whatsoever in maintaining the share price over the next few years.”
Nevertheless, a sizable share of respondents in the AP-CNBC poll just aren’t sure. Seventeen percent said they don’t know how Facebook will turn out. Other key results:
- Among those who own stocks, bonds, or mutual funds, 54 percent said Facebook would be a good investment; 34 percent said it would not. That’s similar to the result among non-investors, 51 percent of whom say it would be a good investment.
- Active investors are more likely than other investors to say it wouldn’t be a good investment, however; 38 percent said so, compared with 30 percent of investors who have not actively changed their holdings in the past month.
- Those under age 35 are most apt to say Facebook shares would be a good investment (59 percent), followed by baby boomers (55 percent). About half of those in Generation X (ages 35 to 44) said it’s a good investment (48 percent), while among seniors, 39 percent said so.
In the end, the poll results seem to indicate that despite some reticence on the part of more seasoned investors, initial demand for the Facebook IPO will still be high as many institutions, and a good chunk of the public believes the company has promise in the longer term.
“If I was an investor, personally [Facebook] isn’t something I’d be getting involved in. You’re taking a hell of a lot on trust, and it’s a pretty punchy valuation,” David Lowery, equity strategist at Faraday Research, told “Squawk Box Europe.” “There’s a lot of hype out there and by the sounds of it, they’re pricing the IPO a bit lower just so they don’t suffer from a collapse on the first day of trading.”
He added: “There’s going to be so much demand for this short-term. It might go up, but in six months, I just don’t know.”
Facebook is expected to price after the bell on Thursday, May 17 and will begin trading on the Nasdaq on Friday, May 18 under the symbol FB.
-By CNBC's Allen Wastler
-Associated Press contributed to this post.