Even if the company is Facebook.

When the social media company’s stock starts trading Friday under the symbol FB, buyer demand is expected to explode. At its initial offering price of $38 a share, the 8-year-old upstart is worth $104 billion. That’s more than such giants as Disney and Kraft.

The riches that will flow to the company and its early investors total nearly $16 billion.

As with any initial offering, Facebook’s IPO follows lots of negotiation _ over price, paperwork, selling and buying. Here are some questions and answers about its public debut:

Q: So why is Facebook going public?

A: The same reason many other fast-growing companies do: to raise money. Selling stock to the public gives companies money to run their businesses, expand and buy other companies. Sometimes companies go public even if they have no plans for the money. Facebook says it wants to establish a public market for its shares in case it needs to raise money from investors in the future.

Q: What happens in an IPO?

A: The company sells ownership stakes to the public for the first time. Facebook plans to sell up to 421 million shares. That represents a 15 percent stake in the company. The sale is expected to raise $16 billion.

Q: Who owns shares of Facebook now?

A: Well-connected investors, employees and top insiders like company directors. They are selling 241 million shares, or more than half the total being sold. The company has said it’s selling shares at $38 each. At that price, those early owners will pocket $9 billion, or an average of $230 million each. The company will get $7 billion.

Q: Who will buy the shares?

A: In an IPO, there are two buyers. The first are the investment banks that helped the company file IPO documents with regulators and contacted pension funds, mutual funds and other big institutions to gauge a price for the shares. These investment banks are called underwriters. In Facebook’s case, 33 banks are helping out; Morgan Stanley has the lead role. The underwriters guarantee to the company that they’ll buy all of the shares at the IPO price.

Q: When do the underwriters buy the shares?

A: Before shares start trading publicly. Facebook’s underwriters were expected to buy all the sellers’ shares Thursday night. But first, the underwriters had to negotiate a price with a second group of buyers _ the institutions that will buy the shares from them. They did that Thursday night, settling on a price of $38. In a document filed with regulators this week, Facebook had estimated that the price would be between $34 and $38.

Q: Is this negotiated price the IPO price?

A: Yes. But that’s not what the underwriters pay the company and insiders. After settling on an IPO price, the underwriters subtract a commission for their work. With big IPOs like Facebook’s, that’s typically 3 percent no fax cash advance. At $38, that would mean Morgan Stanley and the other Facebook underwriters would get $1.14 off for each share. They’d pay $36.86 a share. Underwriters have five days to transfer the money to the company and other sellers.

Q: What do the underwriters do with their shares?

A: They sell them to big institutions, along with some favored individual investors, before public trading starts. They do this usually the night before. In Facebook’s case, all of the underwriters’ shares are expected to be sold by Friday morning before the stock exchanges open at 9:30 a.m. in New York.

Q: Is that when trading of Facebook begins?

A: No. The new owners who want to sell their Facebook shares must call their traders first. The traders will call “market makers” at the Nasdaq stock market, where Facebook’s shares will be listed. Market makers are firms that agree to hold shares in a company so buyers and sellers can easily trade them. The market makers negotiate among themselves to find a price between what most buyers and sellers are demanding. That can take up to two hours, after which the first Facebook shares will exchange hands. The price will appear under the symbol FB.

Q: I read that Facebook will be worth more than $100 billion after the IPO. What does that mean?

This is the so-called market value of the company. It’s what investors trading a portion of its shares think the whole company would be worth if all its shares were trading. At $38 per share, Facebook would be worth $104 billion.

Q: Who are the early investors who are selling?

A: One of the biggest is DST Global Ltd., a London firm founded by Russian investor Yuri Milner that first invested in Facebook in 2009. DST and its affiliates plan to sell 45.7 million shares. At $38, Milner’s firm would get $1.74 billion. One of the earliest investors, Reid Hoffman, a co-founder of LinkedIn Corp. who put money into Facebook in 2004, is expected to sell stock worth up to $36 million. Other sellers include Goldman Sachs, which invested last year. It expects to get as much as $1.1 billion for its shares.

Q: What about Mark Zuckerberg?

The Facebook CEO plans to sell 30.2 million shares. He would pocket up to $1.15 billion. Part of Zuckerberg’s holdings include special shares that give him voting rights on shareholder proposals. After the IPO, he will control 56 percent of votes.

Q: Where will the Facebook IPO rank among IPOs?

A: In terms of money raised, it will be the third-biggest U.S. IPO in history, edging out AT&T Wireless. That company’s IPO in 2000 raised $10.6 billion according to Renaissance Capital, an IPO advisory firm. The biggest IPO was Visa Inc. in 2008. It raised $17.8 billion.

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The company beat Wall Street expectations on net income and revenue, posting a profit of $1.06 billion, or $2.61 per share, up from $904 million, or $2.12 per share, in the same quarter last year.

Revenue jumped 12 percent to $10 billion, from $8.9 billion.

Deere & Co., based in Moline, Ill freecreditscore., said Wednesday that it expects equipment sales to increase about 15 percent in 2012 and is raising its full-year profit prediction to about $3.35 billion. Deere previously predicted profits of $2.75 billion.

Shares are edging higher in premarket trading.

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Papoulias will call a meeting of all leaders of parties represented in parliament except for an ultra-nationalist party for 2 p.m. in Athens tomorrow to discuss the proposal, said Evangelos Venizelos, the leader of Pasok, the third-biggest party. Venizelos spoke after meeting with Papoulias and the leaders of two other parties.

]]> http://goodcounsels.com/greek-president-pitches-new-government-plan-bloomberg/feed/ http://goodcounsels.com/us-10-year-notes-add-to-longest-gain-since-88-bloomberg/ http://goodcounsels.com/us-10-year-notes-add-to-longest-gain-since-88-bloomberg/#comments Sun, 13 May 2012 08:28:01 +0000 Guru http://goodcounsels.com/us-10-year-notes-add-to-longest-gain-since-88-bloomberg/ Treasuries had the longest streak of weekly gains in more than 13 years after elections in France and Greece added to concern governments may struggle with deficit- cutting plans used to combat the region

The government in Madrid is expected to announce a new round of financial sector reforms Friday, after the Bank of Spain effectively nationalized one of the nation’s largest banks late Wednesday.

Spanish banks have been struggling for years with the fallout from the nation’s housing bust, which saddled them with billions of euros worth of bad property loans.

While the government has taken steps to support banks, analysts say more needs to be done to fix the problem once and for all.

"Given the public financing situation in Spain, there’s a limit to how much money the government can put in the banking sector," said Enam Ahmed, a London-based economist for Moody’s Analytics.

Spain has injected several billion euros into the banks, but Ahmed estimates that it will take hundreds of billions of euros to resolve the problem. "That’s something the Spanish government cannot afford," he said.

Madrid has already warned that its budget deficit will be larger than expected this year, which has made investors in the bond market nervous. The yield on 10-year Spanish bonds eased Thursday after rising above 6% the day before.

How to save the euro

"If the state takes over a significant share of this gigantic mountain of bad debt, accumulated over a decade, it will lose whatever little trust it still enjoys in capital markets," said Hans-Joachim Voth, a professor of finance at Universitat Pompeu Fabra in Barcelona. "Interest rates will spike up, its deficit will grow, and the whole country will effectively slide into a Greek-style downwards spiral."

At the same time, Spain needs a healthy banking sector to get its economy growing again and create jobs. The Spanish economy fell back into recession in the first quarter and unemployment rose to 24.4% — the highest in the eurozone.

"They’re walking a tight rope," said Jay Bryson, global economist at Wells Fargo Securities. "Something needs to be done to revive the economy, but the markets are very nervous about the deficit."

Managing assets through a bad bank. In addition to requiring banks to increase loan loss provisions, Spain is expected to announce some sort of framework Friday to remove bad assets from the banking sector.

While the details remain sketchy, there is speculation that the government will set up a real estate holding society, or a bad bank, to house distressed property loans.

The goal is to segregate bad assets and give banks a chance to start lending again, but it remains to be seen if the government will take losses or try to sell the assets at a later date.

Voth thinks the scheme probably won’t work. He said bad banks are only effective when banks’ debts are small and the government has sufficient funding and good credit.

"This is not the case in Spain," said Voth. "The banks are large, their bad debts are large, the government is already running high deficits, and it has massive debts as it is, without a bad bank."

Meanwhile, the government is also expected to require that banks set aside an additional €30 billion, which would raise provisions against property loans from 7% to 30%, according to analysts at Nomura Securities.

Nationalizing Bankia. The Spanish central bank announced late Wednesday that Bankia, the nation’s third-largest bank, had recommended that €4.5 billion in existing state aid be converted into ordinary shares.

The move gives the Spanish government an overall stake in Bankia worth 45% — effectively nationalizing the bank.

The investment is aimed at "enhancing the bank’s soundness and restoring full market confidence," the Bank of Spain said.

In addition, Bankia said Jose Ignacio Goirigolzarri, a university professor and former BBVA () executive, would replace Rodrigo Rato as chairman. Rato, a former right-wing politician, oversaw the bank’s initial public offering last year.

Bankia was formed by combining the operations of seven regional banks, or Cajas, which were among the hardest hit by the housing bust.

Spain falls into recession

"I think people are underestimating the Bankia issue," said Antonio Barroso, an analyst at political research firm Eurasia Group. "Bankia was a big obstacle in resolving the banking problem."

While many questions remain about the strategy going forward, Barroso said it is encouraging that the government is tackling the problems in the banking sector.

"Many challenges remain and investors are very skeptical," he said. "But it’s good the government has the will to do something." 

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Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes.

]]> http://goodcounsels.com/greece-euro-exit-debate-goes-public-bloomberg/feed/ http://goodcounsels.com/how-small-investors-can-get-in-on-facebook-ipo/ http://goodcounsels.com/how-small-investors-can-get-in-on-facebook-ipo/#comments Tue, 08 May 2012 11:24:01 +0000 Guru http://goodcounsels.com/how-small-investors-can-get-in-on-facebook-ipo/ You might think that scoring a stake in Facebook’s initial public offering if you are an average investor is like trying to change your privacy controls on the social networking site — seemingly impossible.

But it turns out that Facebook is making an effort to have some of its hotly sought after shares accessible to all. In its updated IPO prospectus filed late Thursday, Facebook added E*Trade, the popular low-cost online trading firm, to the list of what is now 33 underwriters of its offering.

"The only reason Facebook would ever authorize E*Trade as an underwriter is because it wants broad retail distribution of its IPO," said Scott Sweet, senior managing partner at IPO Boutique, a research firm tracking new offerings.

That means that users of E*Trade’s online brokerage service will have an opportunity to buy shares of Facebook at the IPO price, which should be between $28 to $35 per share. E*Trade () has 2.8 million brokerage accounts..

Shares of an IPO are primarily distributed to institutional investors, mutual funds and hedge funds who are the biggest clients of the major Wall Street banks that manage the sale of the shares. On average, these brokerages only allocate 15% of their initial offering to retail investors, said Sweet.

Zuckerberg courts investors in Facebook’s online road show

But Wall Street executives estimate that small investors could get a bigger piece when it comes to Facebook’s offering — between 20% and 25%, according to a report in the New York Times. Facebook declined to comment for this story.

While E*Trade would not specifically speak about its role as a co-manager in Facebook’s IPO, the company has participated in over 600 public offerings in the past, including MasterCard (, Fortune 500) and Google (, Fortune 500). The company explained its typical IPO process to CNNMoney.

Those who have a brokerage account with E*Trade can participate in a company’s IPO, in this case Facebook, through the firm’s IPO center. Users can place a so-called conditional offer by indicating how many shares of Facebook they would want to buy, and the maximum price per share they are willing to pay.

Once Facebook’s final price for its initial public offering is set, which is likely to be on May 17, E*Trade would than divvy up its portion of the IPO shares to the clients who said they were willing to pay at least that much. An E*Trade customer will need to have sufficient available funds in their accounts to support the offer.

The company also clarified that customers will need to a complete a user profile that aims to gauge whether those who are interested are suitable investors for IPOs by asking questions about annual income, investable assets, and investment goals guaranteed online payday loans. However, there are no publicly defined requirements.

Like E*Trade, other brokerage firms may also be able to offer their clients a piece of the action.

5 reasons to not ‘like’ Facebook’s IPO

Fidelity’s brokerage arm could secure access to shares of Facebook at its IPO price thanks to a relationship it has established with Deutsche Bank (), one of the underwriters of Facebook’s offering.

But Fidelity’s got a few more eligibility hurdles than E*Trade: IPOs are only available to clients who have a minimum of $500,000 in assets at Fidelity, and have made at least 36 trades during the last year.

Similarly, Charles Schwab (, Fortune 500) brokerage customers could also have a chance:

"We aren’t an underwriter, but we do periodically offer IPOs to our clients through arrangements we have with underwriters," said Alison Wertheim, a spokeswoman with Schwab. "It remains to be seen to what extent we’ll participate in the Facebook IPO."

Meanwhile, TD Ameritrade () said it is "a selling group member," which means it is likely involved in selling or marketing Facebook IPO shares, but not as an underwriter.

Investors can also gain exposure to Facebook’s IPO by buying a stake in a number of funds that already own shares of the company.

T. Rowe Price () has a $408 million investment in Facebook, spread across 19 of its mutual funds, including the T. Rowe’s Media & Telecommunications Fund () (PRMTX), while Fidelity has positions in Facebook across more than 30 of its mutual funds, such as the Fidelity Contrafund ().

GSV Capital (), which invests in "high growth" pre-IPO companies, holds 350,000 shares of Facebook. That represents nearly 15% of its total portfolio. The Firsthand Technology Value Fund () boasts 600,000 shares of Facebook.

There is also the Global X Social Media Index () exchange-traded fund, which includes social media stocks LinkedIn (), Zynga () and others as top holdings. It will add Facebook to its holdings five days after the company makes its stock market debut.

But of course, any investor needs to be careful of buying a fund just because it has a position in Facebook.  

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The conservative New Democracy party appeared the most likely to win the top spot, while the extreme right-wing Golden Dawn seemed set to gain parliamentary seats for the first time. Days of talks are likely to ensue as parties attempt to hammer out a governing coalition.

The election will determine the country’s course after years of austerity measures that have outraged voters but which were critical in convincing international creditors to extend Greece billions in loans to keep its debt-saddled economy afloat.

Greece is heavily dependent on billions of euros worth of international rescue loans from other European countries and the International Monetary Fund, and must impose yet more austerity measures next month to keep the bailout funds flowing and prevent a default and a potentially disastrous exit from the group of nations that use the euro currency.

According to updated exit poll figures an hour and a half after polls closed, New Democracy was projected to win 19-20.5 percent, followed by the leftist Radical Left Coalition, or Syriza, with 15.5-17 percent. The formerly majority socialist PASOK party was projected in third place with 13-14 percent.

“The truth is here _ the reality of this result is that at the moment this produces no government,” outgoing deputy prime minister and senior PASOK official Theodoros Pangalos said. “It is not a question at the moment of who gets a little more or a little less.”

If the figures are confirmed by official results expected later Sunday, the result will be a devastating blow to PASOK, which won a landslide victory in the last parliamentary elections in 2009 with more than 43 percent. PASOK, along with New Democracy, have dominated Greek politics since the fall of the seven-year dictatorship in 1974.

“This is a major political earthquake, that has devastated PASOK,” senior New Democracy official Panos Panagiotopoulos said. “New Democracy remains the first party but has a very low support number business cards design. It is an explosion of anger and despair. The fallout has affected many parties _ fairly and unfairly.”

Thirty-two parties were vying for the support of nearly 10 million registered voters, many of whom were undecided on the eve of the election.

Golden Dawn, which has vowed to kick out immigrants and mine Greece’s borders with Turkey, was predicted to win between 6.5-7.5 percent, well above the 3 percent needed to enter parliament. If borne out by official results, it will be a stunning result for a party that won just 0.23 percent in the 2009 elections.

“Greek citizens should not fear us, the only ones who should fear us are the traitors,” Golden Dawn leader Nikolaos Michaloliakos told The Associated Press.

Whichever party wins the most votes will get a bonus of 50 seats in the 300-member parliament. But with percentages so low and between seven and 10 parties projected to enter parliament, that will not be enough to form a governing majority of 151 seats.

The first party will be given a mandate to form a coalition, and will have three days for negotiations. If it fails, the mandate will go to the second party for a further three days, and then on to the third party.

If no coalition emerges, the country will have to have another election _ a prospect which has alarmed Greece’s international creditors.

New Democracy and PASOK were uneasy coalition partners in a temporary six-month power-sharing deal forged last November following a political crisis that saw former PASOK head George Papandreou resign as prime minister. In 2009, Papandreou had led his party to a landslide election win, earning 43.92 percent of the vote.

Before the election, New Democracy head Antonis Samaras had vowed not to form a coalition with its socialist rivals, saying such a prospect would require too much haggling to be effective. However, it was not clear how he would react to the official result.

____

Demetris Nellas and Nebi Qena in Athens contributed.

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While policy makers didn

The Spanish Treasury said it raised (EURO)2.52 billion ($3.3 billion) in 3- and 5-year bonds, slightly above the target range of (EURO)1.5 billion to (EURO)2.5 billion. However, it did have to pay more to investors to part with their cash, in a sign that the country’s economy remains a concern.

The auctions came ahead of the monthly ECB meeting, which took place this time in Barcelona. As expected, the ECB kept its benchmark interest rate at the record low of 1 percent. Investors are now awaiting the post-meeting press conference of ECB president Mario Draghi to see what he says about the state of the eurozone economy and what policy tools, if any, the bank has at its disposal to kickstart growth.

“The apparent ‘conflict’ between fiscal austerity on one hand and economic growth on the other seems likely to feature prominently,” said Mark Miller, European economist at Capital Economics. “Attention is likely to focus on whether Draghi will give any hints that the ECB might be willing to provide further support for the region’s economy.”

The pressure on Europe’s policymakers to come up with measures to boost growth has grown over the past few weeks. Even Draghi has spoken of the need for a “growth compact” alongside the “fiscal compact” governments agreed earlier this year to keep their budgets under much tighter control.

Polls suggest that Francois Hollande will defeat Nicolas Sarkozy in this Sunday’s presidential election and that may lead to a different emphasis in Europe’s ongoing struggle to deal with its debt problems.

Ahead of Draghi’s press conference, stocks were solid in Europe. The FTSE 100 index of leading British shares was up 0.6 percent at 5,795, while Germany’s DAX rose 1.1 percent to 6,782. The CAC-40 in France was 1.4 percent higher at 3,271.

Wall Street was poised for a solid opening, with both Dow futures and the broader S&P 500 futures 0.2 percent higher.

Outside of Europe, investors will be keeping a close watch on the next round of U.S. economic data later in the day, which includes the monthly non-manufacturing survey from the Institute for Supply Management. A stronger than anticipated manufacturing report on Tuesday helped the Dow Jones industrial average close at its highest level in nearly five years.

Weekly jobless claims figures will also feature as traders position themselves for Friday’s closely-watched nonfarm payrolls data, which often set the market tone for a week or two after their release. A weak private payrolls survey from ADP on Wednesday dampened expectations over Friday’s official government data.

Trading in the currency markets was subdued with the euro 0.1 percent lower at $1.3130.

Earlier in Asia, Hong Kong’s Hang Seng fell 0.3 percent to 21,249.53, a day after posting strong gains. But mainland Chinese shares edged higher, with the benchmark Shanghai Composite Index up 0.1 percent at 2,440.08 and the Shenzhen Composite Index gaining 0.6 percent to 961.99. Markets in Japan were closed for a public holiday.

Oil prices slipped slightly, with the benchmark New York rate down 40 cents at $104.82 a barrel.

____

Pamela Sampson in Bangkok contributed to this report.

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