IPO
An IPO is an Initial Public Offering. This is the initial sale of stock to the public from private investors and holders of the company. There are several reasons why a company would issue stock to the public. Publicly traded stock allows the company to offer shares in mergers and acquisitions, easing the mechanism in purchasing other companies and lowering the cost. Publicly traded stock also allows the company to offer incentives to employees, by giving shares of stock. The greater exposure and publicity also help retain and attract talented employees and management. The value of a company is also higher compared to when it’s private. This is because increased levels of liquidity and transparency are more attractive to investors, who will allocate a higher multiple for the company’s value. The biggest downfall to a company issuing stock to the public is greater scrutiny from investors, as all financial records are made public. This comes in the form of an increase in legal and marketing costs, plus time spent with analysts and other investors explaining the inner workings of the company.
Facebook Does an About-Face: Set to Move Higher?
By George Leong, B.Comm. for Profit Confidential
Facebook, Inc. (NASDAQ/FB) has attracted over one billion pairs of eyeballs, and my stock analysis suggests its share price may really explode upward if the company can monetize this massive user base. The future for the company will clearly lie with its aggressive shift into mobile advertising, an area that numerous companies, including Google Inc. (NASDAQ/GOOG), are trying to control, based on my stock analysis. (Read “Google Could Be the First $1,000 Stock.”)
The problem with Facebook is that it needs to have better control over its social networking platform. My stock analysis suggests this could only happen if the company can more effectively integrate its product into the operating system of a smartphone, which appears to be the case, as Facebook is expected to launch a new “Android”-based product. The speculation is that a Facebook phone will be produced by HTC Corporation and will focus on the integration of Facebook. (Source: Ortutay, B., “Eyes on Facebook mobile event as company evolves,” Associated Press, April 4, 2013.)
In the article, the potential stakes for Facebook and other companies in social networking are growing exponentially. Spending on U.S. mobile advertising is estimated to surge 77% in 2013 to $7.29 billion, according to eMarketer. Facebook is estimated to corral $965 million.
Based on my stock analysis, I like the company’s focus on pumping up its mobile advertising area. In the fourth quarter, mobile revenues accounted for 23% of Facebook’s total $1.33 billion in advertising revenues, up from 14% in the first quarter. The interesting number was the company’s total mobile monthly active users, which came in at 680 million in … Read More
New IPOs Hitting the Market More Dot-Bombs?
By Mitchell Clark, B.Comm. for Profit Confidential
When stocks are hot, you can make money in initial public offerings (IPOs). Wall Street had a phrase representing the so-called confidentiality between corporate finance departments and research—the “Chinese Wall.” In practice, the Chinese Wall was a joke; it should’ve been the “Chinese Fall.”
When big IPOs came to market, the research department at the firm I worked for would always issue a “Buy” rating a few weeks thereafter. Even though many of these IPOs declined on the stock market after listing, I never once saw a “Sell” rating. It was an industry-wide, 100% conflict of interest. Research analysts (an expense for the firm) had to toe the line set by corporate finance (the firm’s fee generator). Analysts knew they would get fired if they didn’t cheerlead. Ratings of IPOs were—and still are—totally fraudulent.
And that’s what Wall Street is really good at: packaging a product and selling it to the marketplace for a cut. Nothing else matters but the money. When I was a stockbroker, my boss would tell me to go hang out with real estate agents, doctors, and dentists. Instead of cold-calling potential clients, I called the trading floor to solicit views. Needless to say, that career path quickly ended. They did offer me another job, but I said, “No, thanks.”
Wall Street is a system. At the retail full-service level, Wall Street is always hiring. They learned from the insurance industry that hiring stockbrokers is just a numbers game. Bring them in, do sales training, get the broker’s assets from their family and friends, then repeat. Turnover is high. At the institutional level, it’s a bit … Read More
Going Large-Cap for Capital Gains? Yep, and It Works
By Mitchell Clark, B.Comm. for Profit Confidential
Back in April of 2012, oil and gas giant ConocoPhillips (NYSE/COP) created spin-off Phillips 66 (NYSE/PSX) from its downstream energy assets. In the energy business, the term “downstream assets” refers to refining and marketing. For every two shares held in ConocoPhillips, shareholders received one free share of Phillips 66. It was a great bonus for shareholders, and it’s a gift that keeps on giving. Phillips 66 listed on the stock market around $34.00 a share last April; now it’s at $52.00, and the stock pays a dividend.
Every once in a while, the stock market offers up a bonus like this one. A big company sells off or splits up its different businesses, and this can create a lot more wealth for shareholders. The former Kraft Foods Inc. recently did this, and now shareholders have two dividend paying businesses to contend with. Many investment banks and consulting firms advise big corporations to do this, but not only because of the great fees spin-offs create; the whole idea is to let the stock market decide what individual businesses are worth, because in a conglomerate, it’s difficult to place a value on any one division.The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
I was a stockbroker in the late 1990s, and that was a time when the stock market was roaring. The trading action was so good, day trading was a cinch. I saw all kinds of stocks fly high and then crash. I saw all kinds of initial public offerings (IPOs) hit the market and then crash in value. When the bubble was really building, people off the … Read More
You’ll Think Differently about Today’s Job Report after You Read This
By Michael Lombardi, MBA for Profit Confidential
Some of the best spoken statements in 2012 by politicians were something along the lines of, “We have created jobs.” Sadly, these statements are great for political advancement only. The fact of the matter is that, after trillions of dollars have been thrown at the economy, the U.S. jobs market outlook is bleak at best—job creation is too low and unemployment rate is still too high for the U.S. economy to grow.
The Bureau of Labor Statistics (BLS) reported U.S. jobs market conditions today for the month of December 2012. The unemployment rate for the U.S. economy inched a little higher from what was reported for November 2012. The unemployment rate now stands at 7.8% compared to the 7.7% reported in November 2012. The BLS revised the November unemployment rate to 7.8 %. (Source: Bureau of Labor Statistics, January 4, 2012.)
With that said, and as my dear readers know, I don’t think the unemployment rate itself provides a proper view of the overall condition of the jobs market. Like many economists, I look at the underemployment rate to get the real measure of job growth—and it was unchanged for December at 14.4%.
Following is a table of the unemployment rate reported by the BLS for 2012.
| Unemployment Rate 2012 | |
| Month | Unemployment Rate |
| January | 8.3% |
| February | 8.3% |
| March | 8.2% |
| April | 8.1% |
| May | 8.2% |
| June | 8.2% |
| July | 8.3% |
| August | 8.1% |
| September | 7.8% |
| October | 7.9% |
| November | 7.8% (revised lower) |
| December | 7.8% |
| Average for 2012 | 8.08% |
While mainstream media and politicians have been arguing that the U.S. jobs market is improving, the average unemployment rate for 2012 was still above 8.0%.
Unfortunately, this … Read More
Where Are the First-Time Homebuyers?
By Michael Lombardi, MBA for Profit Confidential
The mainstream is ignoring some of the key aspects of the housing market in the U.S. economy. Because home prices are increasing, it doesn’t necessary mean the housing market as a whole has recovered. There are fundamental changes to the housing market that need to be fixed before there is an actual recovery.
The housing market is missing the most basic component: first-time homebuyers. In November 2012, first-time homebuyers only accounted for 30% of all the sales. Sadly, this number has been decreasing. In October, first-time homebuyers accounted for 31% in the U.S. housing market, and in November of 2011, this number was 35%. (Source: National Association of Realtors, December 20, 2012.)
How bleak is demand by the first-time homebuyers? During the month of November, the 30-year fixed-rate mortgage fell to a record low of 3.35%; it was 3.38% in October. As the mortgage rates went down, logically demand should have increased, but this is not happening in the housing market.
If we don’t have first-time homebuyers, then why are home prices increasing, and who is actually buying? We currently have a housing market that is mainly propped up by the intuitions. Returns elsewhere for investors are next to nothing, so they are running to the housing market.
Companies in key stock exchanges in the U.S. economy are struggling, the eurozone is too risky to invest in and bonds aren’t worth looking at. So, investors are resorting to the housing market; they are buying distressed properties at deep discounts, renovating them, and renting them out to earn a meaningful rate of return.
For example, Silver Bay Realty Trust Corp … Read More
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