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'Apple Being Used as ATM for Facebook IPO'

Thursday, 17 May 2012 | 4:12 PM ET
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Are investors selling Apple to raise cash to buy Facebook?

Apple shares have been falling from the Tree of Knowledge between Good and Profits, heading down for their fifth straight session and losing seven percent in a week. That's a $34 billion loss of market cap, perhaps twice the amount that Facebook hopes to raise.

For one Appleshare, you will probably be able to buy around 14 shares of Facebook, so perhaps some investors are thinking, "Why not take some profits on a stock that's done really well and gamble on the new kid?"

"It looks like Apple is being used as an ATM for the Facebook IPO," writes Chris Verrone at Strategas. "The post-earnings bounce is now entirely erased on the (stock) chart."

"It appears as such," says Steve Grasso of Stuart Frankel. Grasso started wondering if this might happen last month. "I made the case that Department of Justice headlines (regarding Apple) were a catalyst for funds to accelerate their sales of both Priceline and Apple to make room for Facebook."

Could it be that some funds are selling Apple in preparation of rebalancing once Facebook joins the NASDAQ 100?

"The weighting argument may not be quite as valid," says Jon Najarian, founder, with brother Pete, of brokerage Trademonster.com. "That's because FB must be 'seasoned' on NASDAQ, NYSE or NYSE Amex." Najarian says that means Facebook might need to be listed throughout the summer before it's considered "seasoned" enough to be in the NASDAQ 100. "However, any fund that is not tied to strict NASDAQ criterion would, and I believe has already, changed their weighting of the exposure of AAPL and inclusion of FB."

Of course, if Facebook doesn't pop tomorrow, maybe Apple's fall is about...Apple.

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The Priceline Group
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