Wednesday, May 16, 2012

Facebook IPO triggers retail investor craze

By Alistair Barr and Olivia Oran
SAN FRANCISCO (Reuters) - If "Facebook For Dummies" helped you find friends and post pictures on the world's No. 1 onlinesocial network, then consider "Facebook IPO Confidential" which purports to teach you "How To Get Rich With The IPO Of The Century."
The e-book is one of about eight self-help manuals that appear to have sprung up overnight to try to capitalize on the frenzy surrounding Silicon Valley's biggest initial public offering.
With other titles such as "The Facebook IPO Pitch: Are You In?" and "How To Invest In Facebook", these books are far from bestsellers. But, along with countless online forums and news articles about the IPO, they underscore the desire of ordinary people - many of whom have never invested in stocks before - to get in on the $15.2 billion share sale.
"If you can't invent Facebook, the next best bragging rights would be to say that you had invested in the social media phenom when it was a dorm room project. If not then, perhaps the IPO," Nancy Miller wrote in a guide titled "The Facebook IPO Primer."
Many wealth managers are advising their clients to avoid Facebook, pointing to a sky-high valuation of up to $104 billion set by the IPO, and potentially much higher once it starts trading. The company also shows signs of slowing growth, has yet to figure out how to make money on mobile, and new shareholders will have little influence as nearly 56 percent of voting shares will be in the hands of one person: Chief Executive Mark Zuckerberg.
But such warnings are falling on deaf ears as many people are drawn in by Facebook's brand name and the fact that one in seven people around the globe are on the social network. Facebook Inc (FB.O) on Tuesday increased the size of its IPO by nearly 25 percent and raised the target price range.
"I can't remember another IPO that got this much attention," said Max Wolff, a senior analyst at GreenCrest Capital. "Half the people talking about the Facebook IPO probably don't know what IPO stands for."
The strong demand means that most retail investors will have to wait until Facebook begins to trade on the Nasdaq on Friday to get hold of the shares - and risk getting trampled. If the stock skyrockets, the average person might end up getting orders filled at a price much higher than they wanted and then face the possibility of losses as funds steamroll in and then zip back out, taking the price off its highs.
"I don't know if buying on the day of the IPO is the best idea, but I like the novelty factor of it and being able to say that you bought on the first day," said Micah Stubbs, a first-time investor who works in the oil and gas industry and lives in Bartlesville, Oklahoma.
Facebook's share price could surge 30 percent on debut day, said Reena Aggarwal, a professor of business administration and finance at Georgetown University's McDonough School of Business in Washington. She suggested retail investors may be better off holding off for a few weeks until the share price settles.
"The market will try to figure out the right price for the stock and it's going to open really high," Aggarwal said. "There are lots of risks - the company is high growth but also high risk, and there is a lot of uncertainty, so retail investors have to be careful."
Facebook is going public after accumulating almost a billion users, nearly $4 billion in annual revenue and a brand name augmented by the 2010 Oscar-winning film "The Social Network", which charted the rise of Zuckerberg who started Facebook in his Harvard University dorm room.
Most ordinary people have only the slimmest of chances of getting hold of IPO shares as Facebook's 33 underwriters, led by Morgan Stanley (MS.N), JPMorgan (JPM.N) and Goldman Sachs (GS.N), are expected to give priority to their most important clients, usually institutional investors.
Typically, only 5 to 30 percent of IPO shares are set aside for retail investors, underwriters say.
Discount broker E*Trade Financial (ETFC.O), which was added to the list of IPO underwriters at the last minute, offers some help. Last week, its home page threw up a pop-up box explaining what investors need to do to get in on IPOs.
Would-be buyers have to answer about 25 questions about their financial status and investment habits. They are then prompted to place a conditional offer for at least 50 Facebook shares and a maximum price they are willing to pay per share.
Online prediction market Intrade, which lets investors bet on major events such as the U.S. presidential election, offers another alternative. It started a contract on Tuesday for bets on where shares of the social network will close on their first day of trading.
Facebook reported $205 million in first-quarter profit, down 12 percent from the same period a year ago. While sales leapt 45 percent year-on-year to $1.6 billion, that lagged the 55 percent growth of the fourth quarter.
On Tuesday, General Motors Co (GM.N) said it will stop advertising on Facebook, amid concerns that the ads have had little impact on consumer spending. The auto maker continues to use Facebook pages for marketing its vehicles, but the news underscored the risks Facebook faces as it tries to boost revenue from its huge user base.
RegentAtlantic Capital is among the wealth managers recommending clients stay away, without much success.
"Most clients or their children have some interaction with Facebook, so I believe the demand will be high," RegentAtlantic wealth advisor Chris Cordaro said, warning that there could be "a lot of pain" ahead for investors who buy at inflated prices on Friday.
Because of such concerns, some retail investors plan to get in and get out of the stock quickly. That may be fine if they get in at the IPO price but if they end up buying once the shares have started trading up, they may not be so lucky.
"Retail participation is associated with more speculation and noise, and because of that there is more volatility," said David Sraer, a professor of economics at Princeton University. "They tend to herd together and be on the same side of the market, which drives imbalance."
Retired chemical engineer Alvan Sweet ordered through Schwab 10,000 Facebook shares worth $380,000 at the high end of the indicative IPO price range. If he is lucky enough to get an allocation, he plans to dump the shares on day one or two.
Sweet, whose son is a senior managing partner of the IPO Boutique advisory firm, has invested in IPOs before but says this is the first time friends in his Florida condo community have pestered him about getting shares. "They were hoping that because my son is in the business I would have access," he said.
One of his friends, Lucky Bloch, admits to losing money on an IPO before. But he is confident this investment will pay off.
"Initially Over-Priced is what IPO should stand for," he complained. "If you can get in before the first day, then sell a couple of days later, there's money to be made," he told Reuters. "Can you help me get shares?"
(Additional reporting by Alexei Oreskovic and Sarah McBride, editing by Edwin Chan, Tiffany Wu and Richard Chang)

Friday, May 11, 2012

Micro Cap Report

At The Micro Cap Report we continue to look for undervalued, under-followed growth stories. Please sign up to receive a free copy of The Micro Cap Report at
Here are four micro caps to look into.

Barfresh Food Group, Inc. manufactures ready-to-blend drinks, which the company seeks to distribute to the food-service industry. It specializes in smoothie and cocktail mixes. Barfresh’s recipes are based on those of an Australian company that Barfresh recently purchased the rights to. This Australian company was profitable and won a variety of awards for its products. There’s always a summertime market for cold beverages, and Barfresh stands to grow once it convinces more chains of the superiority of its products. LONG 5000 SHARES BRFH
We called what we believe to be the top of DOMARK on 5-8-2012 at roughly 4.50. We were unable to locate shares to short
Domark “is focused on acquiring operating entities through acquisition and then providing marketing and management services in support of the acquired entities.” They’re currently promoting a nifty, potentially profitable accessory that can be used to provide solar power to iPads. These stocks have risen in value exponentially over the last few days in the wake of heavy promotion of the iPad accessory. Their value dropped today, but it will be interesting to see if it picks back up. Disclosure EMC is long but unable to sell 25,000 of domark. We would sell if the restriction could be lifted.
EXCO is an energy company engaged in managing onshore oil and natural gas properties. After growth over the past week, investment experts are projecting continuing increase in value for this stock, as EXCO is on the brink of consummating transactions which should positively impact shares. For more information on recent developments in this company, see Disclosure EMC is long 100 call options of XCO

PFTI (Puradyn Filter Technologies Inc.)

Puradynowns the rights to manufacture and market its Puradyn by-pass oil filtration system for use with internal combustion engines and hydraulic equipment. The Puradyn system cleans oil by continually removing solid and liquid contaminants through a filtration and evaporation process. This maintains the oil’s viscosity and greatly reduces or even eliminates the necessity for oil changes.” It seeks to market its technology to the oil and gas, construction, transportation, marine, and hydraulics industries. The companies’ shares have decreased somewhat in value after a relative high last summer, but its products have gained high praise from industry investigators, and it stands to grow from its current low if it is successful in executing some major contracts. Disclosure EMC is long 75,000 shares of PFTI
The Information is disseminated to broker-dealers, members of the general public, readers of our website, and the financial community (collectively the “Recipients”) at the direction of the Profiled Companies or third party shareholders of the Profiled Companies and should be used by the Recipients for informational purposes only and even then the Information should only be used as a beginning point for further investigation. This is because EMC: (a) only presents neutral or positive information regarding the Profiled Companies and its business prospects; and (b) does not present the risks or negative aspects associated with the Profiled Company or its securities. Therefore, the Information is in and of itself wholly inadequate to formulate any investment decision, and we strongly advise against making any investment decisions solely based on the Information. It is imperative that you consult with your professional advisor, including your financial advisor, financial planner or attorney regarding the advisability of investing in any securities, especially with regard to penny stocks. In addition, you should consult with online services that are available free of charge at,,, Google, or other websites that offer investment guides, valuable information pertaining to penny stocks and penny stock frauds and the risks of investing in penny stocks. Additionally, you should review the quarterly and annual financial and disclosure reports at, and

Wednesday, May 9, 2012

The Importance of Investor Relations Consulting for Startup Enterprises, Part II

Last time, we discussed the importance of investor relations consulting for startup enterprises. As we recall, startups, regardless of how sure they are of their product or service, face great difficulty in establishing themselves in the market. Their offering may not yet be trusted by customers or investors, and they have to compete for market share with more established companies that possess much deeper resources. Such challenges are greatly exacerbated in a struggling economy. A skilled investor relations consultant can help startups navigate these difficulties by strategizing an effective visibility campaign, helping startups navigate the oftentimes complex world of regulations, and by putting the startup in contact with networks in the investment world.

To see the benefits of investor relations consulting in such cases, it is useful to examine case studies. Furnari Scher LLP is a firm that, among other services, provides investor relations counseling specializing in “helping clients become attractive for investors and joint venture partners.” They feature a team of consultants who have experience as both attorneys and entrepreneurs. As such, they are specially equipped to provide legal expertise to startups. A brief discussion of some of their success stories provides a glimpse into the benefits of effective investor relations consulting.

Technological and medical entrepreneurs oftentimes must pass stiff licensing requirements in order to get their products to market. For example, Furnari Scher LLP worked with a group of scientists who sought to “develop a minimally invasive tool to detect breast cancer using laser technology invented at, and patented by, a preeminent national lab.” This technology “was at least four years away from receiving the government approvals required to sell the device.” Therefore, the company needed funding to pay for further research. Furnari Scher LLP was able to introduce the client to an investor who was able to produce the money necessary “to complete a 200 patient clinical feasibility study and [to assist] the company in structuring and executing three rounds of private placement securities offerings.” This story illustrates how an effective investor relations consulting firm can take advantage of investment networks to help a startup successfully place its product or services.

Another challenge facing companies seeking funding are trading regulations. A company that gets on the wrong side of state and federal regulators can easily go under due to heavy fines and probationary conditions. Furnari Scher LLP worked with a medical technology company that faced challenges while seeking funding. Those problems included state investigations after a manager “made some technical mistakes while offering securities in a private offering.” Furnari Scher LLP helped this company by advising it regarding the removal of its rogue director and by serving as a liaison between the company and the investigation. Management was thus able to focus on company operations during a critical period, all the while Furnari Scher LLP engineered “favorable settlements with state regulators, often obtaining significant reductions (up to 80%) in fines originally contemplated by regulators.” This story illustrates the potential benefits of having access to investor relations specialists who have the knowledge and experience needed to navigate regulations.