Facebook's initial public offering has so far seen lower-than-expected demand from institutional investors who were concerned about the company's growth prospects, according to people with knowledge of the matter cited by Bloomberg.
According to the people who requested anonymity, according to Bloomber a number of investors expressed reluctance after Facebook said on 9 May that advertising growth had failed to keep up with the increase in users. Facebook was also telling analysts that sales might fall short of their most optimistic projections, two people said.
Meanwhile, Facebook executives have another week to market the IPO, set to be priced on 17 May, as underwriters increase efforts to drum up interest from large shareholders, according to one person. The top end of the price range valued the world's most popular social network at $96 billion, higher than Standard & Poor's 500 Index members including Walt Disney Co and Visa Inc.
According to analysts, it was overvalued at the price and investors were becoming increasingly selective, with there being quite a few fallen angels around, like Netflix. They say people who buy Facebook at these levels were speculators rather than investors.
Lacklustre interest from institutional investors at the current juncture could force the company to rely more on support from retail investors, whose demand remained strong, people quoted by Bloomberg said.
Meanwhile, some people, according to Bloomberg, believe, the company may still elicit enough demand to sell shares at or above the high end of a projected range, people said. Institutional investors tended at times to hold shares longer than retail investors, which lessened volatility of the stocks.
Facebook, led by chief executive officer Mark Zuckerberg, plans to raise around $11.8 billion through the IPO, the biggest in history for an internet company. Underscoring concerns that growth may fall off, 79 per cent of respondents in the Bloomberg Global Poll of 1,253 investors, analysts and traders who were Bloomberg subscribers said Facebook did not deserve the top-end valuation.
According to Mituso Shimizu, a market analyst at Tokyo-based Iwai Cosmo Securities Co, expectations on Facebook were way too high and given its fundamentals, the company did not look anywhere cheap in valuation.
Facebook's 337.4 million shares are under offer at $28 to $35 each. The shares would list on the Nasdaq Stock Market under the symbol FB with Morgan Stanley (MS), JPMorgan Chase & Co (JPM) and Goldman Sachs Group Inc (GS) leading the sale.
Meanwhile, Facebook frenzy is spreading ahead of the company's big-time stock market debut and speculation over the ownership of a piece of the world's leading social network had got so feverish by the weekend that according to one report, there was too much demand for the stock even as another said the demand was lacking.
Facebook, which is set to go down as one of the most valuable US firms to go public, has launched an intense marketing drive ahead of its expected commencement of trading on the tech-heavy Nasdaq on 18 May.
In its filing with the US Securities and Exchange Commission, Facebook has set a price range of $28 to $35 for its shares, valuing the firm at around $70 billion and $87.5 billion.
Google's valuation when it went public in 2004, was $23 billion, and its present market valuation is $200 billion.
However not there are some who are not happy with the price set for the social network founded by Zuckerberg just eight years ago from his Harvard dorm room. Zuckerberg who is only 27, would retain 57.3 per cent of the voting power of the shares.
Others expected better, with some predicting a price of $44 a share in the short term, and a much higher figure over the longer term.