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Facebook IPO excitement skips Chicago

Facebook CEO Mark Zuckerberg  |  AP file photo

Facebook CEO Mark Zuckerberg | AP file photo

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ROEDER REPORT

David Roeder reports on real estate at 6:22 PM. Every Thursday on News- radio 780 and 105.9 FM WBBM. The reports are repeated at 10:22 p.m. Thursday and 7:22 a.m. Sunday

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Updated: May 7, 2012 12:46PM



In the normally hushed corridors of investment banks and fund management firms, the hype over the next two weeks will be enough for a Super Bowl.

Facebook is coming! Starting this week, it will begin road show presentations leading to an expected initial public offering of shares May 18. The social network has said it wants to price its shares at from $28 to $35 each and it has employed an astonishing lineup of 33 investment banks to find buyers.

So many people on Wall Street have been hired to vouch for this IPO that there’s nobody left to diss it. Perhaps that’s the plan.

Facebook might need all those sales skills. I spent most of Friday reaching out to some of the wealthiest investors in Chicago, and not one confessed an interest in the IPO. Several said they believe the valuation is too high. A common sentiment was that the easy money has been made. Get in now, and you risk being a sucker or, to use the term of Goldman Sachs Group (GS), one of the lead underwriters for Facebook, a “muppet.”

The Facebook money juggernaut has had few stops in Chicago. Billionaire J.B. Pritzker, who invests in tech firms through his New World Ventures, is the only prominent Chicagoan known to have a Facebook stake. He and other investors got in for $100 million in 2010, but at what a source called a high valuation at the time.

Pritzker could not be reached for comment. In March, he told Bloomberg TV that he has no plans to sell his shares in the IPO. He also predicted the company will be worth more than $100 billion.

The offering would value the company at up to $95 billion. At $35 a share, the IPO would raise $13.5 billion. Facebook’s documents said that about 45 percent of the shares it offers will be sold by early-stage investors, including Goldman, Accel Partners and founder Mark Zuckerberg, who plans to sell 5.7 percent of his shares to pay taxes.

“You don’t like to see insiders getting out, and they’re selling a little more than expected,” business Professor Erik Gordon of the University of Michigan told Bloomberg News.

A source said Friday that Facebook’s road show includes no stop in Chicago, a remarkable omission considering three of the underwriters are based here. They are William Blair & Co., Loop Capital Markets and Cabrera Capital Markets.

I’ll give Facebook the benefit of the doubt, though. Maybe it didn’t want to risk getting stuck by NATO.

BUBBLING CRUDE: Friday’s report of weak job growth in the United States applied a direct hit to the oil market. The price of oil finished below $100 a barrel for the first time since February, closing down almost 4 percent in New York trading to $98.59.

Experts see signs that world demand is slackening while supplies are growing, a turnaround of expectations from just a few weeks ago. Analyst Phil Flynn of Chicago-based PFGBest said that in some cities, $3 gas is more likely than $5 gas.

TIME FOR A COKE? According to Coca-Cola (KO), if you bought one of its shares in 1919 for $40, it would be worth more than 9,000 shares and some $341,000 today. With that in mind, be advised that Coca-Cola is expected to split its stock two-for-one for the first time in 16 years. Companies do it to encourage trading, which usually bids up the price.

OR MAYBE BEER? Zacks Investment Research has bumped Boston Beer (SAM) up to a “buy” ranking because it has posted positive earnings surprises for the last four quarters. The maker of Samuel Adams beer has tended to miss revenue estimates but exceed analysts’ guesses about the bottom line. Zacks analyst Brian Bolan said that on Wednesday, the company reported earnings per share of 56 cents, vs. a consensus of 40 cents. “The beat of 40 percent was a reacceleration of earnings that aggressive growth investors tend to look for,” he said.

CLOSING QUOTE: “I think investors will be surprised by the fundamental improvements going on in REIT portfolios. The simple fact is that virtually no construction has been going on, and no new supply is being added. That makes for a long-term trend of powerful earnings growth.” — Wilson Magee, director of global REITs, Franklin Templeton Real Asset Advisors, as quoted by Reuters, on why real-estate investment trusts that own commercial property are doing well despite the housing slump.



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