Market buzz versus the hard numbers - CMC Markets provides an analysis
SINGAPORE, May 17, 2012 /PRNewswire-Asia/ -- Facebook is finally going public on Friday 18 May (as widely expected), and retail investors will at last be able to trade the company's shares. However, we have yet to see if anyone will be able to make money from the landmark IPO, or if it is purely a chance for the private shareholders to cash in.
Having looked back at some of the highest profile IPOs of the last decade, Colin Cieszynski, Senior Market Analyst at CMC Markets, sees definite opportunities to make money - if traders know the rules and are prepared to trade on both sides of the market.
Commenting on the findings of his analysis, Cieszynski said, "Companies around the world go public all the time, but only a few captures the imagination of the street, the media and the general public. There are usually only so many shares available for sale in an IPO and, if demand outstrips supply, traders are ready and waiting to purchase shares when they debut in the open market. This unfilled demand tends to drive the initial trading spikes, but while this may be great for those lucky enough to get IPO shares, the question remains as to whether there will be any room for anyone else to make money."
To answer the question of whether the Facebook IPO will be a flash in the pan or a real money maker, Colin examined post IPO trading for eight major companies that debuted in the last decade, four from the technology sector and four from other industries (see figure1 below).
Key findings:
Cieszynski concluded, "Performance of previous high-profile internet related IPOs suggests that we could see a major spike off the open and perhaps even strength through the first day of trading. We could then see a retreat through the rest of May and most of June with the potential for an advance in late June or early July as analysts are cleared to publish research and the company's first earnings report approaches. This could also coincide with traditional stock market seasonal trading swings."
CMC Markets' customers will be able to trade on the price movement of Facebook shares via their CFD accounts on Friday afternoon (18 May), directly after Facebook shares are expected to list on the NASDAQ. Please note that trading Facebook CFDs does not mean that a trader acquires physical Facebook shares but instead gains similar exposure to them.
Figure 1:
| Day 1 Trading | ||||||||
| Price | Baidu | Groupon | Visa | MasterCard | GM | T Hortons | ||
| IPO | $85.00 | $27.00 | $20.00 | $45.00 | $44.00 | $39.00 | $33.00 | $27.00 |
| Open | $100.01 | $66.00 | $28.00 | $83.00 | $59.50 | $40.30 | $35.00 | $36.21 |
| High | $104.06 | $151.21 | $31.14 | $122.69 | $69.00 | $46.05 | $35.99 | $37.99 |
| Low | $95.96 | $60.00 | $25.90 | $80.00 | $55.00 | $40.20 | $33.89 | $33.00 |
| Close | $100.33 | $122.50 | $26.11 | $94.25 | $56.50 | $46.00 | $34.19 | $33.10 |
| Close/IPO | 18.04% | 353.70% | 30.55% | 109.44% | 28.41% | 17.95% | 3.61% | 22.59% |
| Open/IPO | 17.66% | 144.44% | 40.00% | 84.44% | 35.23% | 3.33% | 6.06% | 34.11% |
| Close/Open | 0.32% | 85.61% | (6.75%) | 13.55% | (5.04%) | 14.14% | (2.31%) | (8.59%) |
| High/Open | 4.05% | 129.11% | 11.21% | 47.82% | 15.97% | 14.27% | 2.83% | 4.92% |
| Close/High | (3.58%) | (18.99%) | (16.15%) | (23.18%) | (18.12%) | (0.11%) | (5.00%) | (12.87%) |
| Close/Top of | 53.95% | 68.52% | 4.01% | 33.38% | 10.71% | 99.15% | 14.29% | 2.00% |
| Day 1 Range |
(Figure 1 image: http://www.cmcmarkets.com.sg/sites/public.sg/files/assets/img/figure_1.png)
Average Returns in the Days Following a High Profile IPO:
http://www.cmcmarkets.com.sg/sites/public.sg/files/assets/img/figure_2.png)
About CMC Markets
CMC Markets is a leading global provider of CFD and foreign exchange (FX). Since Peter Cruddas founded CMC Markets in 1989, the company now services more than 80,000 clients worldwide, who placed approximately 30 million trades last year.
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