Facebook Falls Below Its IPO Price

(Updated with Monday’s closing price.)

Less than an hour into only its second day of trading, 88 million shares of Facebook (FB) had changed hands and the price was down 12 percent from Friday’s close of $38.23. (The shares closed Monday at $34.03.) In other words, you could buy this most anticipated of initial public offerings at a substantial discount from the price that Wall Street reserved for its preferred clients.

With a valuation of $104.8 billion at the May 18 close, Facebook was already worth more than three times the other 10 U.S. consumer Internet companies to have gone public in the past year; LinkedIn (LNKD), valued at $10.3 billion, is second.

“IPOs are scary things,” says blogger and newsletter writer Eddy Elfenbein. “It’s hard to justify Facebook going for sixty times” next year’s estimated earnings, he adds, “in a market where Apple (AAPL) is going for less than 10 times next year’s estimate.”

So what price can be justified? Elfenbein calculates that Facebook’s estimated 2013 earnings of $1 a share, combined with its projected 50 percent earnings growth rate for the next five years—and there’s no guarantee the company will meet those estimates—give it a fair value of $33 a share. Even so, he says buying the stock would be prudent only at closer to $23.

You may get that chance. Another analyst, PrivCo’s Sam Hamadeh, points to concerns about Facebook’s fundamentals: declining first-quarter advertising revenue; the number of unique visitors to Facebook dropping in the U.S.; the company warning in its most recent S-1 filing that the shift to mobile access vs. desktop access could complicate its ad business. He also anticipates a wave of new stock hitting the market once insiders are free to unload their holdings, and predicts that others will sell to raise money to pay taxes on their gains.

“When you factor in that the lockup expires in November and tax-related selling, we think the shares, once the hype dies down, will be in the $20s by yearend—$24 to $25 per share,” Hamadeh told peHUB.

If Zuckerberg & Co. should want consolation, they need look no further than Google’s (GOOG) 2004 initial public offering. Few remember that the king of Internet search actually had to slash the price of its shares well below its earlier targets. It ultimately IPO’d at $85, which was far lower than management’s earlier indicated range of $108 to $135. And though GOOG did enjoy a nice Day One pop, it went to nowhere and back for the better part of a month—before more than quintupling in less than four years.

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Asian Stocks Drop as U.S. Home Prices Slip; China Mengniu Falls

December 28, 2011, 6:06 AM EST By Yoshiaki Nohara

Dec. 28 (Bloomberg) -- Asian stocks fell for a second day amid slow trading, with the regional benchmark index headed for its biggest annual decline since 2008, after U.S. housing prices fell, damping the earnings outlook for Asia’s exporters.

Sony Corp., Japan’s No. 1 exporter of consumer electronics, dropped 2.4 percent. SK Telecom Co. paced declines among South Korean companies that went ex-dividend today. China Mengniu Dairy Co. plunged 24 percent after saying moldy feed given to cows led to excessive levels of a toxin in its milk. Tokyo Electric Power Co. fell to the lowest level in at least 37 years after Japan’s trade minister said the utility should consider temporary government control.

The MSCI Asia Pacific Index slipped 0.6 percent to 113 as of 7:41 p.m. in Tokyo, with all but one of the gauge’s 10 industry groups falling. For the month, the index is heading for a 0.5 percent decline. The measure has dropped 18 percent this year, the most since 2008.

“The U.S. housing market has yet to get on a firm recovery path because we don’t know if prices will actually come back,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $29.6 billion. “Market participants are in vacation mode and aren’t doing much.”

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today. The gauge was little changed yesterday in New York as better-than-estimated U.S. consumer confidence overshadowed a decline in home prices and concern about Europe’s debt crisis.

‘No Incentive’

Japan’s Nikkei 225 Stock Average fell 0.2 percent after a report showed factory output fell 2.6 percent in November as Thailand’s floods disrupted supply chains at manufacturers such as Sony and Honda Motor Co. Trading volume on the Nikkei was 43 percent below the 100-day average.

“There’s no incentive for investors to move their positions at the end of year,” said Hisakazu Amano, who helps oversee the equivalent of $29 billion at Tokyo-based T&D Asset Management Co. “The bottleneck is U.S. housing data. Corporate earnings are recovering and consumer confidence was good.”

South Korea’s Kospi Index lost 0.9 percent. Yesterday was the last day to buy shares and still get a year-end dividend in 15 percent of the companies included in the 785-member gauge.

Australia’s S&P/ASX 200 lost 1.3 percent, while Hong Kong’s Hang Seng Index slid 0.6 percent. Markets in Australia and Hong Kong reopened today after a four-day weekend.

Exporters dropped after the S&P/Case-Shiller index of property values in 20 U.S. cities dropped 3.4 percent in the year ended October after decreasing 3.5 percent in the year ended September, the New York-based group said yesterday.

Sony fell 2.4 percent to 1,354 yen, and Canon Inc., the world’s biggest camera maker, slid 1.6 percent to 3,415 yen.

Going Ex-dividend

SK Telecom led declines among firms that have the highest dividend yields among South Korea’s 50 largest publicly traded companies, according to data compiled by Bloomberg. SK Telecom retreated 6.3 percent to 141,500 won. Rival KT Corp. slipped 4.8 percent to 35,850 won. Korea Exchange Bank fell 5.1 percent to 7,450 won.

China Mengniu Dairy plunged 24 percent to HK$20.00, the biggest loss since September 2008. In a random inspection, the level of a toxin in a batch of the firm’s milk was more than double the nation’s permitted level, an unidentified official at the General Administration of Quality Supervision, Inspection and Quarantine said in an interview with the Xinhua News Agency.

Tokyo Electric Plunges

Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.5 times for the Stoxx 600. Utilities have lost 27 percent this year, the worst among the 10 industry groups on the Asian benchmark gauge, as Japanese power generators tumbled after a nuclear crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

Tepco, as the utility is known, slumped 12 percent to 186 yen today, the lowest since at least September 1974. The company needs to consider all options related to its survival, including the government taking temporary control of the utility, trade minister Yukio Edano told company president Toshio Nishizawa yesterday.

Tepco has lost 91 percent this year, the biggest drop in the MSCI All Country World Index, which includes both emerging and developed world markets.

--With assistance from Norie Kuboyama in Tokyo. Editors: Jason Clenfield, Jim Powell

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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Mortgage Debt Falls to Five-Year Low

December 09, 2011, 8:22 AM EST By John Gittelsohn and Kathleen M. Howley

Dec. 8 (Bloomberg) -- U.S. mortgage debt, a driver of consumer spending during the real estate boom, dropped to the lowest level in almost five years in the third quarter as foreclosures wipe out home loans and housing purchases fall.

The volume of outstanding home mortgages declined to $9.88 trillion from $9.94 trillion at June 30, according to Federal Reserve data released today. The reading was the lowest since the end of 2006. Mortgage volume peaked at $10.6 trillion in early 2008, the final months of a decade-long borrowing binge.

The mortgage lending that boosted spending and padded bank profits during the 2001 to 2006 surge in home prices is failing to aid the U.S. economic recovery as the worth of real estate plunges, Doug Duncan, chief economist of mortgage-financier Fannie Mae, said in a telephone interview from Washington. Outstanding home-loan volume may drop “for at least another couple of years,” he said.

“Consumers are still leveraged well above average,” Duncan said. “That has to be worked off before you’ll see a return of robust consumption.”

Lending for mortgages to purchase homes probably will fall to $80 billion in the fourth quarter, the lowest since 1991 and one-fifth the volume of a record high in mid-2005, according to the Mortgage Bankers Association in Washington. Home prices are down 31 percent from a July 2006 peak, based on the S&P/Case- Shiller home price index of 20 U.S. cities.

Underwater Loans

Declining property values have wiped out more than $4 trillion in real estate wealth over four years, according to the Federal Reserve, and left almost a third of U.S. mortgage payers owing more than the value of their house, data from Zillow Inc. show. The 29 percent of mortgaged homeowners who were underwater on their loans in the third quarter is up from 23 percent a year earlier, according to the Seattle-based real estate information and sales service.

Kenna Stormogipson, in Oakland, California, is one of those underwater borrowers. She said she’s stuck in a house she bought for $485,000 in 2005.

“You can’t leave,” said Stormogipson, 31, a high school science teacher. “You can’t really spend money on anything else.”

The duplex home, which has first and second mortgages totaling $462,000, would sell for about $200,000 today, she said. Loan payments took up more than half of her monthly $5,000 salary, she said.

Stormogipson stopped making full mortgage payments six months ago because her lender wouldn’t agree to a loan modification. This Christmas, she’s going to make gifts at home, such as soap and arts and crafts items.

‘Big Problem’

“Negative equity is the big problem,” Stan Humphries, chief economist for Zillow, said in a telephone interview. “It’s hard to come up with a way to erase the negative equity that’s fair to homeowners who were going to continue to pay and in a way that doesn’t bankrupt either the banks or the taxpayer.”

Homeowners who aren’t underwater have been able to put more money in their pockets by refinancing at historically low interest rates. The average U.S. rate for 30-year fixed mortgages was 3.99 percent this week, just above a record low of 3.94 percent on Oct. 6, according to Freddie Mac, the McLean, Virginia-based mortgage-finance company.

The rate likely will be 4.2 percent this quarter and match that level in the first three months of 2012, according to a forecast from the Mortgage Bankers Association. That would be the lowest quarterly number in Freddie Mac records dating to 1971.

Refinancing Terms

While 4.5 million homeowners refinanced last year, an estimated 2.3 million others were ineligible for lowering monthly payments because of home-value declines, according to a September Federal Reserve report. President Barack Obama in October directed Fannie Mae and Freddie Mac, which have both been under U.S. government conservatorship since 2008, to ease refinancing terms for underwater homeowners.

The volume of outstanding mortgage debt probably will fall further in 2012, Humphries said, as homeowners continue to pay down principal and properties are taken over by banks. About 4.5 million homes with $800 billion in mortgages are more than 90 days delinquent, and most of those will be repossessed, Fannie Mae’s Duncan said. Currently, about 2.2 million homes are in foreclosure, according to Lenders Processing Services in Jacksonville, Florida.

Cars, Televisions

Plunging home values have counteracted the so-called wealth effect that spurred people to spend money as real estate values grew. Consumers spent about $677.3 billion, or about $113 billion a year, from home-equity loans on purchases such as cars or televisions during the 2000 to 2005 real estate boom, according to a 2007 paper by former Federal Reserve Chairman Alan Greenspan and Fed economist James Kennedy. Another $376.2 billion, or about $63 billion a year, went toward home renovations.

During the last five years, households may have cut spending even more than they expanded it during the real estate boom, Chad Wilkerson and Megan Williams, economists at the Federal Reserve Bank of Kansas City, wrote in a report earlier this year.

“Consumption can be more sensitive to changes in housing wealth than other types of wealth,” the economists wrote.

--Editors: Kathleen M. Howley, Kara Wetzel

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net -0- Dec/07/2011 23:07 GMT

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European Stocks Drop as Italy Auctions Bonds; Software AG Falls

July 14, 2011, 12:34 PM EDT By Adam Haigh

July 14 (Bloomberg) -- European stocks fell for the fourth day in five after Italy auctioned bonds and Moody’s Investors Service said the American government may lose the Aaa credit rating it’s held since 1917.

Petrofac Ltd., the U.K.-based oilfield services and engineering provider, decreased 3.8 percent as Barclays Plc advised selling the shares. Software AG plunged 16 percent, its largest slide in more than two years, after posting a decline in sales. SAP AG, the world’s biggest business-software maker, lost 2.8 percent.

The Stoxx Europe 600 Index sank 0.8 percent to 267.68 at the 4:30 p.m. close in London. The gauge has fallen 2.2 percent this week amid concern that the sovereign-debt crisis in Europe will spread to the larger economies of Italy and Spain.

“Moody’s action overnight was a response to the small but rising risk of a short-lived default,” wrote Jim Reid, a global strategist at Deutsche Bank AG in London, in a report today. “Moody’s is now the rating agency putting most pressure on Congress to act.”

Moody’s put the U.S. on review for the first time since 1996 as talks to raise the country’s $14.3 trillion debt limit stalled, adding to concern that political gridlock will lead to default. Even a temporary default will probably have “large systemic effects” on the economy and Treasury finances by disrupting money funds, the repurchase-agreement market and foreign investors’ willingness to buy the government’s debt, according to JPMorgan Chase & Co.

Italy Bond Auction

Italy sold five-year bonds at the highest yield in three years. The Treasury priced 1.25 billion euros ($1.8 billion) of 2016 bonds today at an average yield of 4.93 percent, compared with a yield of 3.9 percent at a previous auction on June 14.

Prime Minister Silvio Berlusconi won a confidence vote in the Italian Senate on an austerity package aimed at balancing the budget in 2014, paving the way for the Chamber of Deputies to pass the plan tomorrow.

Greece’s credit rating was cut three levels to Fitch Ratings’ lowest grade for any country in the world as the company followed rivals and said that a default is a “real possibility.”

European stocks had increased yesterday as Federal Reserve Chairman Ben S. Bernanke said he’s prepared to provide more stimulus if needed and as China’s economic growth beat estimates. The Stoxx 600 has rallied 87 percent including dividend income since March 2009 as governments and central banks from Washington to London enacted emergency stimulus measures to revive the economy.

U.S. Earnings Season

European stocks recouped some losses after JPMorgan Chase & Co. posted second-quarter earnings that topped estimates.

Germany’s Landesbank Hessen-Thueringen snubbed the European Union’s bank stress tests, refusing to give the European Banking Authority permission to publish all of its data. The stress test results will be published tomorrow after the close of European equity markets.

National benchmark indexes declined in all 18 western European market today. The U.K. FTSE 100 Index slid 1 percent, Germany’s DAX Index declined 0.7 percent and France’s CAC 40 Index retreated 1.1 percent.

Petrofac dropped 3.8 percent to 1,445 pence after the company was downgraded to “underweight” from “equal weight” at Barclays.

SAP, Software AG

Software AG tumbled 16 percent to 35.19 euros for the biggest decline in the Stoxx 600 as Germany’s second-largest maker of business software reported second-quarter revenue that missed analysts’ estimates due to currency moves and its failure to sell licenses. Software AG also said that demand to implement products from SAP fell from the same period a year earlier. SAP slipped 2.8 percent to 40.86 euros.

Accor SA and Intercontinental Hotels Group Plc fell 2.2 percent to 29.64 euros and 3.2 percent to 1,241 pence, respectively, after rival Marriott forecast third-quarter earnings of 25 to 29 cents per share. That fell short of analysts’ estimates for earnings per share of 30 cents.

Daily Mail & General Trust Plc slumped 4.1 percent to 421.3 pence after saying that advertising sales declined 7 percent in the 13 weeks through July 3.

Mothercare Plc decreased 1.4 percent to 405 pence as first- quarter U.K. comparative sales declined 4.3 percent.

Storebrand ASA surged 5.5 percent to 46.48 kroner for the biggest gain on the Stoxx 600. Norway’s largest publicly traded insurer posted second-quarter profit today that beat analysts’ estimates.

--Additonal reporting by Conor Sullivan in London. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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U.S. Index of Leading Economic Indicators Falls 0.3%

May 19, 2011, 11:05 AM EDT By Alex Kowalski

(Updates with economist comment in fourth paragraph.)

May 19 (Bloomberg) -- The index of U.S. leading indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflects temporary setbacks including auto-plant shutdowns.

The Conference Board’s gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg News survey.

A jump in firings that moved opposite to increased hiring last month indicated unevenness in the labor market. At the same time, Federal Reserve policy makers noted during their April meeting that job prospects “continued to improve gradually” and economic growth will persist at a “moderate pace.”

“We’re probably not going to see the same pace of contraction as the first quarter, but the economy certainly has throttled back a little bit,” said Charmaine Buskas, chief strategist at 4Cast Inc. in New York. “The leading indicators are not only giving back some of the gains that we’ve seen over the last months, but we’re also seeing temporary setbacks, partly as a result of some shutdowns from the auto sector.”

Estimates of 58 economists in the Bloomberg survey ranged from a 0.2 percent decrease to a 2.0 percent increase.

Six of the 10 indicators in the leading index subtracted from the total, led by jobless claims, which took away 0.33 percentage point.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,342.75 at 10:02 a.m., after the report was released. The yield on the benchmark 10-year note, which moves inversely to prices, rose to 3.22 percent from 3.18 late yesterday.

Jobless Claims

In April, the four-week moving average of jobless claims rose four out of the five weeks. The Labor Department attributed the gains to unusual events that seasonal variations failed to take into account, including a spring break holiday in New York, a new emergency benefits program in Oregon and auto-plant shutdowns caused by the disaster in Japan.

A report today showed fewer Americans than forecast filed applications for unemployment benefits last week, adding to evidence that temporary events caused last month’s surge.

Jobless claims declined by 29,000 to 409,000 in the week ended May 14, according to Labor Department figures. Economists in a Bloomberg News survey projected a drop to 420,000.

The gauge of supplier deliveries and the number of building permits also subtracted from the Conference Board index total.

The spread, or difference between the overnight federal funds rate and the yield on the 10-year Treasury note, boosted the index by 0.35 point.

Seven of 10

Seven of the 10 indicators that make up the Conference Board’s leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times.

The Conference Board estimates new orders for consumer goods, bookings for capital goods and the money supply adjusted for inflation.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.1 percent after a 0.2 percent gain the prior month.

The coincident index tracks payrolls, incomes, sales and production -- the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.

The gauge of lagging indicators increased 0.5 percent last month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.

U.S. Economy

The U.S. economy grew less than forecast in the first quarter as government spending declined by the most since 1983 and household purchases cooled. Gross domestic product rose at a 1.8 percent annual rate from January through March after a 3.1 percent pace in the final three months of 2010, the Commerce Department said April 28.

Target, the second-largest U.S. discount retailer, posted a 2.7 percent gain in first-quarter profit that beat analysts’ projections, bolstered by the credit-card business. Still, Chief Executive Officer Gregg Steinhafel said a faster expansion would help boost consumer purchases.

“While the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven, particularly for more moderate-income households,” Steinhafel said May 18 in a call with analysts. Those households “need to see further improvements in housing and income growth before they’ll have the capacity to meaningfully increase the discretionary spending.”

--With assistance from Chris Middleton in Washington. Editor: Kevin Costelloe

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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