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Facebook IPO falling short of expectations

Facebook's initial public offering hasn't generated the expected demand, so far. Analysts claim that institutional investors are concerned about the companies growth prospects.

Some investors expressed concerns after Facebook announced on May 9th that the advertising growth hasn't held in line with the increase in the userbase. Bloomberg published a report today, quoting insiders who didn't want to be identified with the matter.

Facebook are now telling analysts that they may not meet their projections. The company executives has another week to market the IPO, set to price May 17th. Underwriters are trying to ramp interest to get large shareholders interested. Facebook are said to be valued at $96 billion, however not everyone shares that view.

Bloomberg add “It’s overvalued at that price,” said Filippo Garbarino, who oversees $50 million at Frontwave Capital Ltd. in Chiasso, Switzerland. “Investors are becoming more selective and there are quite a few fallen angels around, like Netflix. Those who buy Facebook at these levels are more speculators than investors.”

Lackluster interest from institutional investors at this stage could compel the company to rely more on buying from retail investors, whose demand remains robust, people said. The company may still elicit enough demand to sell shares at or above the high end of a projected range, people said. Institutional investors tend to hold shares longer than retail investors, lessening a stock’s volatility.”

Facebook chief Zuckerberg is trying to raise $11.8 billion through the IPO, which is the biggest in history for an Internet company. Facebook will be offering 337.4 million shares at $28 to $35 each. They hope to sell 180 million shares. Existing owners such as Goldman Sachs and Digital Sky Technologies are offering 157.4 million shares. Zuckerberg will also offer 30.2 million of his 533.8 million shares.

Kitguru says: Zuckerberg is said to be worth $17,500 US this year.

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