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Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

finance.yahoo.com

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Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#31

Post by JumpCrisscross »

cube13 wrote: post #27
JumpCrisscross wrote: post #25

The original Reuters article does a better job explaining this than the link-bait title here: http://www.reuters.com/assets/print?aid=USBRE84L06920120522 FB amended their S-1 to lower revenue forecasts. Following that, a research analyst at Morgan Stanley cut his revenue forecast on FB close to their IPO. Nothing here should fire anyone up. Equity research must be conducted independently of the investment bankers' no…

>A research analyst at Morgan Stanley cut his revenue forecast on FB close to their IPO. Following that, FB amended their S-1 to lower revenue forecasts. The latter may have been informed by the former but it cannot be said that the former was influenced by the latter without more information. It was the opposite. Facebook filed the amended S-1, and Morgan Stanley, JPMorgan Chase, and Goldman Sachs changed their fore…

Woops...updated

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#32

Post by chernevik »

The bankers surely know how disastrous something like this would be. Facebook has been aggressively indifferent to this whole process, which involves a lot of complexity both in decision making and communication. "Don't make the analysts look bad" is an important rule, but one that's easy to miss unless you spend some time thinking through your communications with the market.

If FB's initial analyst communications emphasized optimism over credibility and deliverability, or FB was impatient with questions casting doubt, the analysts may have had reason to start with high estimates. The May 9 filing comes out and reveals those to be implausible, and they have to dial back to avoid looking silly or as if they're pumping the stock.

If FB management hadn't spent a lot of time thinking about the relationships between the analysts and the investors, they may have missed the point that those investors are the analysts' ultimate clients. If they didn't spend much time with the analysts, they may have neglected building relationships where they could subtly signal issues without tripping regulatory problems.

Or the analysts were idiots and screwed up the biggest assignments of their lives.

Is all this shady company / banker / investor communication good? No, but this is how it's done right now, and if you want your partners to do well you have to work within the rules of the road. It isn't clear to me that Facebook took the time to do that.

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#33

Post by JumpCrisscross »

mikeryan wrote: post #28

So if I'm getting the timing right, in the week leading up to the IPO, they were just about simultaneously dropping their revenue forecasts while boosting the initial offer price? This whole thing just leaves me with a bad taste in my mouth.

There is no singular "they". The equity research analyst, noting the S-1/A revenue forecast amendments by FB, downgraded the stock. The bankers, noting that the issue was 25 times oversubscribed in Asia alone, saw demand outstripping supply.

May the bankers have gotten overzealous? Yes, probably. But we're saying this with the benefit of hindsight. Remember that Morgan Stanley walked into this deal still burning from LNKD popping 90% on its IPO - after the underwriting syndicate had already raised the price by 30% on strong demand [1].

[1] http://articles.businessinsider.com/2011-05-19/tech/30001969...

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#34

Post by Irishsteve »

Facebook : The biggest tech IPO ever. Also possibly the most controversial tech IPO ever. It's down another 3% (On top of 10%). Irregularities popping out left right and centre. Not to mention companies being very public about discontinuing advertising with them.

Someone hates Facebook.

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#35

Post by tbundy »

freehunter wrote: post #19
tbundy wrote: post #12

Not saying it's not true, but would be nice if there was more than an anonymous source to back this up. Unless I missed something.

Yahoo says that Reuters has the information. Reuters says the information was delivered by Scott Devitt, Internet analyst for JP Morgan. Scott Sweet, senior managing partner at the research firm IPO Boutique, backed up the story. It was also confirmed by "an official with a hedge fund firm who received a call from Morgan Stanley about the revision." http://www.reuters.com/article/2012/05/22/us-facebook-foreca...

Ah, I hadn't seen the Scott Sweet quote. Thanks.

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#36

Post by [deleted] »

chernevik wrote: post #32

The bankers surely know how disastrous something like this would be. Facebook has been aggressively indifferent to this whole process, which involves a lot of complexity both in decision making and communication. "Don't make the analysts look bad" is an important rule, but one that's easy to miss unless you spend some time thinking through your communications with the market. If FB's initial analyst communications em…

[deleted]

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#37

Post by larrys »

freehunter wrote: post #20
[deleted] wrote: post #9

[deleted]

Says Reuters. Yahoo just reprints articles from the big news sources, such as Reuters and the AP. Word for word. http://www.reuters.com/article/2012/05/22/us-facebook-foreca...

"Yahoo just reprints articles from the big news sources"

?? It is an article by Henry Blodget. Love him or hate him his opinion about this certainly means something (regardless of his past).

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#38

Post by JoachimSchipper »

JumpCrisscross wrote: post #31
cube13 wrote: post #27

Earlier quoted context omitted.

>A research analyst at Morgan Stanley cut his revenue forecast on FB close to their IPO. Following that, FB amended their S-1 to lower revenue forecasts. The latter may have been informed by the former but it cannot be said that the former was influenced by the latter without more information. It was the opposite. Facebook filed the amended S-1, and Morgan Stanley, JPMorgan Chase, and Goldman Sachs changed their fore…

Woops...updated

(This thread would be easier to follow if you'd mention 'edited' somewhere.)

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#39

Post by Centigonal »

goatforce5 wrote: post #24
Centigonal wrote: post #3

"The SEC should investigate this immediately." Ha, funny!

The author of the article, Henry Blodget, was investigated and fined and banned from working in the finance industry by the SEC. http://en.wikipedia.org/wiki/Henry_Blodget He probably doesn't agree with the prevailing (?) wisdom that the SEC is toothless.

Oh, wow. I was not aware of that. Thanks!

Re: Facebook Bankers Secretly Cut FB Revenue Estimates In Middle Of IPO Roadshow

#40

Post by Centigonal »

goatforce5 wrote: post #24
Centigonal wrote: post #3

"The SEC should investigate this immediately." Ha, funny!

The author of the article, Henry Blodget, was investigated and fined and banned from working in the finance industry by the SEC. http://en.wikipedia.org/wiki/Henry_Blodget He probably doesn't agree with the prevailing (?) wisdom that the SEC is toothless.

Oh, wow. I was not aware of that. Thanks!
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