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This short presentation looks at FB stock as the large lockup agreements expire.
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WE WILL START AT 11:05
Sizing up a post-IPO Facebook
November 1, 2012
This presentation was prepared by SoundView Technology Group and is being provided for information purposes only. SharesPost expressly disclaims all responsibility for any information contained in the presentation and all such information is the sole product of SoundView Technology Group. This presentation is not intended as a solicitation or offering of securities in any jurisdiction.
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1970’s Building Microcomputers
1980’s
Applied AI, CMU, IBM
1990’s Equity Research, Banking
2000’s
Angel Investing, Entrepreneur
2010’s Building out SoundView
Kris Tuttle
Company Advisory Research & Analysis
IPO Coverage Funding, M&A
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Agenda
• Quick look at FB performance and analysis of the IPO.
• Significant developments post the IPO.
• A range of estimates and price targets on the street.
• Facing up to the lockup expirations.
• Are there patterns that we may see again in FB trading?
• What’s the Intrinsic Valuation of FB?
• Wrap up and Q&A.
© SoundView Technology Group 2012
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LinkedIn LNKD
NetSuite N Yelp YELP
Facebook FB
A Few Charts
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IPO Marketing Questions
© SoundView Technology Group 2012
How will FB increase ARPU? What kind of M&A path will FB take? - Video: Natural extension of photos. - Tumblr: Micro-blogging fits well. - Mobile Commerce: Huge profit potential. - Social Search: Very high ROIC. - Music: Murky model but natural extension. Wildcard Ideas: - Sports: Yahoo owns it but it could be on FB. - Security: Real identity + ties in to mobile. - Geneology: Too late! Missed ACOM already.
LIFE AFTER SATURATION
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Post-IPO Considerations
© SoundView Technology Group 2012
[See IPO Marketing Questions] PLUS: - Does FB really care about relationships with institutional investors? - Post-Instagram deals have not offered a strong directional signal from mgmt. - Mobile is the new conundrum for FB in the ARPU area.
Some meaningful datapoints: - Solidified role as the standard: 1. Apple moved FB deeper into their ecosystem in terms of integration. 2. Microsoft has done the same in their recent announcements. 3. Google+ is another swing and a miss for GOOG - There have been some mistakes: Games, Answers - LinkedIn remains the “Facebook for business”
A few considerations on mobile and ARPU: - Larger/better screens devices on phones and tablets will help FB. - Local is a good opportunity for FB when tied to social search.
Long term: Will FB turn out to be a real development platform and ecosystem?
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Brokers Ranges & Targets
© SoundView Technology Group 2012
Revenues High Low Median
2013 $6.9B $5.6B $6.4B
2014 $9.2B $6.5B $8.1B
2015 $11.9B $7.35B $10.0B
EPS High Low Median
2013 $0.85 $0.45 $0.64
2014 $1.13 $0.50 $0.81
2015 $1.26 $0.54 $1.14
High Low Median
Price Target $41 $16 $29
Rating # Analysts
Buy 14
Outperform 11
Hold 10
Underperform 1
Sell 1
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The Lock Up Expiration
© SoundView Technology Group 2012
Lots of stock will be coming into the float so investors should be wary of selling pressure in both Q4 and Q1 2013 (for tax reasons.) However - It’s hard to say how much hedging has gone on in both listed options and OTC derivatives. This can lead to surprises. Investors should focus on *both* timing, trading and valuation in the next few months. Institutions will be thinking about 2013.
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FB LNKD N Overlay
LNKD IV = $123
FB IV = $32 Netsuite N
11 © SoundView Technology Group 2012
Valuation
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Conclusions So far FB stock is down sharply from the IPO and overall expectations have declined by approximately 10%. Fundamentals have been pretty good in the last few months and look encouraging. We have seen this type of trading pattern in the IPO market before with stocks like LNKD and N. FB may do something similar. There are no reliable rules around a major lockup expiration. However it wouldn’t be surprising if the shares traded at 50% of our IV or $16/share. Nobody knows what will happen though. Based on our $32 IV the shares are attractive now and would be pretty compelling in the high-teens. Individuals will be thinking about taxes, institutions will be thinking about 2013 performance. That means lots of shares changing hands from November to January.
© SoundView Technology Group 2012
Closing/Contact Slide
To discuss SoundView Technology Group services, or for any questions, requests or comments please contact me:
[email protected] or call 617-934-1877.
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[email protected] or call 1-800-279-7754.
For more information and research on IPOs please visit IPO Candy: http://ipocandy.com
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