Facebook IPO Bad Sign for Others: Banker
By: Facebook, the internet's top social network and the first U.S. company to start with a market capitalization of more than $100 billion at its initial public offering (IPO) last month, turned into a disappointment later as its stock price fell and one banker said this is a bad sign for other IPOs.
Other IPO candidates are quickly pulling their planned offerings due to difficult market conditions.
"The fact that Facebook's IPO wasn't a successful one very much bothers me as a banker," Urs Rohner, chairman at Swiss bank Credit Suisse told CNBC during an interview at the SwissMediaForum in Lucerne.
"It is a bad sign for the IPO landscape and shows how difficult it is to value a firm like Facebook. It is never a good sign when a company goes public with a very high price and investors suffer losses of 15 or 20 percent right away," Rohner added.
British luxury jewelry firm Graff announced on Thursday that it postponed its $1 billion Hong Kong IPO indefinitely. Similarly, Formula 1 Group is reportedly scrapping plans for its $2.5 billion Singapore IPO until market conditions improve.
Money raised from IPOs plummeted 46 percent so far this year compared with the same period of last year, with confidence falling because of the ongoing euro zone debt crisis, the slowdown in China and Facebook's disappointing IPO, according to Thomson Reuters.
On Thursday, Facebook's stock price closed the session 5 percent higher but shares in the social media giant are still off 22 percent from its $38 IPO price.
Asked whether the disappointing Facebook IPO changes the way Credit Suisse uses Facebook as a means of communication and advertising, Rohner answered: "In terms of using Facebook for communication, nothing will change for Credit Suisse."
"From an advertising perspective, we have not used Facebook for that in the first place, basically because I am skeptical of how it can work as an advertising platform. And I believe this explains why the market is uncertain about its valuation. But as soon as Facebook is able to show that it can grow revenues, its valuation will improve as well," he said.
