The announcement of Facebook's initial public offering (IPO) has created a frenzy of interest within markets.
Speculators are pricing the social network company between US$75 and US$100 billion, with the launch of the IPO expected in May. And IG Markets has now created a 'grey market' for this much-anticipated float.
Our grey market will allow you to gain financial exposure to Facebook before it lists, without having to participate in the IPO. It is an IG Markets financial instrument where you can buy and sell a CFD on the price of Facebook before it lists on a US exchange.
Like grey markets we've created before (for other key floats including Queensland Rail and Telstra), the price will be driven by supply and demand. As such, it will also act as a good indicator of Facebook's final float price.
Head of IG Markets Asia Pacific, Tamas Szabo, commented, 'given the widespread market interest in Facebook's IPO, it is with great pleasure that IG Markets offers this service to our clients. The flexibility of CFDs, along with 24-hour access to global markets made possible through online trading, make our grey market an excellent way to take advantage of the growing speculation over Facebook's impending float.'
Facebook facts
Facebook is owned by Mark Zuckerberg and is the most widely-used social networking site on the internet.
- It now has 845 million global users, 483 million of which use Facebook daily
- 2011 revenue was US$3.71 billion – 88% higher than in 2010
- Facebook made US$1 billion in profit last year
- 85% of Facebook's revenue for 2011 was acquired through advertising
- Mark Zuckerberg owns 28% of the company, which could be worth US$28 billion if Facebook prices in at US$100 billion
The market's reaction to the floating of Facebook
Facebook has not released an initial offering price, but it has estimated to be between US$30 and US$35 per share.
From the time that it announced its upcoming IPO, the market's reaction to the Facebook float has been excitement, with the Wall Street Journal calling it, 'The Big Kahuna of stock listings'. It will be the biggest technology IPO since Google's in 2004, though after Groupon's recent float proving not so successful, some traders have their doubts over the long-term future of Facebook in the stock market.
As Facebook is part of the new-wave of technology listings, some speculators have their eyes on the initial three months after the float to see if it can hold up to current expectations. Issues including changes in legislation or regulatory authorities, or a shift in user sentiment and competitor strength, for example, could adversely affect Facebook. This area of unknown has some participants keenly watching, however the majority of speculators are highly optimistic.
How you can trade the Facebook grey market
Do you have an interest in Facebook and a view on the price at which it will float?
Our grey market on the stock is now available for trading 24 hours. The level to which IG Markets' clients can trade upon will be the expected market capitalisation of the company as opposed to price. Clients can trade off a bid/offer spread based on how they perceive the closing market capitalisation at the end of the first trading day. While the top end of the expected IPO range is US$100 billion, clients are currently anticipating firm upside on the first day, with Monday's US close (February 14) suggesting a market capitalisation of US$118.0 billion.
It is also worth pointing out that IG Markets' clients will be able to buy and sell Facebook shares on the secondary market as a CFD once the company has listed.
Please note, this is not a means to subscribe to new shares in Facebook, but rather a CFD which enables you to gain exposure to one of the world's most anticipated market floats in recent history. CFDs are leveraged instruments; the deposit requirement for Facebook is 20% of the value of your holding.
New to trading CFDs?
Find out why 40% of traders choose IG Markets as their number one CFD provider*. You can also begin trading with us today by applying for an account online.
* 40% of active CFD traders have an account with IG Markets. Investment Trends May 2011 Australia CFD Report.
Disclaimer: IG Markets provides an execution-only service. The material above does not contain (and should not be construed as containing) personal financial or investment advice or other recommendations, or an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of the above information. Consequently any person acting on it does so entirely at his or her own risk. The research does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. IG Markets accepts no responsibility for any use that may be made of these comments and for any consequences that result.
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