Swedes' pension hopes tied to Facebook IPO

 

Close to 3 million Swedes will be watching the upcoming stock market debut of Facebook with added interest after news emerged on Thursday that a major Swedish pension fund planned to invest in the social networking site's initial public offering.

The Seventh AP Fund AP7 (Sjunde AP-fonden – AP7) plans to be among the initial investors in the highly anticipated public offering of Facebook.

AP7's participation in the Facebook IPO means that 2.7 million Swedes will be indirect owners of stock in the popular social networking site, which boasts nearly 1 billion users worldwide.

At the same time, a survey by Swedish online brokerage firm Avanza has revealed that around 7 percent of Swedes are considering buying Facebook stock directly as individual investors.

AP7, the default pension fund for Swedes who opt out of making an active investment choice for their public pensions, plans to invest around 400 million kronor ($56 billion) in Facebook, when it gets listed on the Nasdaq stock exchange in New York later this week.

That means that each AP7 pension saver will end up having about 150 kronor of their pension savings invested in the internet company, according to the Dagens Nyheter (DN) newspaper.

Facebook hopes to raise about $15 billion by releasing more than 400 million shares in the company with a price range of $34-$38 per share, according to the Reuters news agency.

Some analysts have projected that Facebook's IPO could end up valuing the company at more than $100 billion, but many remain skeptical about the valuation of the company, which needs to see a drastic rise in advertising revenue in order to live up the high expectations surrounding the public offering.

One of the skeptics is Avanza economist Claes Hemberg, who is concerned that interest in Facebook stock is so high among Swedes.

"There are a lot of young people who risk making their first and worst deal of all time," he stated.

 

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4 things you need to know about Facebook's IPO

 

The community, which was initially the domain of Ivy League college students, is on the verge of becoming a publicly traded company when it floats on the stock market, an event likely to take place Friday.

That’s great news for investors looking to pick up a piece of the company. With billions of dollars on the line and more than 900 million active community members, Facebook isn’t just a casual hook-up site any more.

There’s a lot to say about how the IPO will affect community members, both among those looking to pick up a few shares in the company and those who use Facebook to share updates and photos with their friends.

You have a chance to own a part of the community

The lure of owning a bit of Facebook, no matter how small, is enticing to many. The obvious is the promise of financial returns from the world’s largest social network, though it’s not entirely clear exactly what the company’s business model will be. It also might be a vanity thing for some, though being a Facebook shareholder will let you vote at the company’s annual general meeting.

Facebook reportedly plans to sell shares at a maximum of $45, meaning it could raise up to $18.4 billion on Friday. It’s likely that it’ll cost you more than that if you want to snap up some shares tomorrow as investors who grab stock at the IPO price look to make a quick buck on their investment. That said, being able to brag about how you own a bit of Facebook to your friends would be kinda neat.

(Note: Please do not take any of this as financial advice. Consult your accountant and think carefully before ploughing your hard-earned cash into any stock.)

Oh, and if you’re an amateur financial analyst, you can take a stab at guessing the closing share price after Facebook’s first day on the market thanks to a fun website.

Facebook will try to make more money from you

One of the big clouds hanging over Facebook’s head as the company ramps up is how to generate more revenue. The company makes around $5 per year per user—far less than the likes of Google and Netflix.

Investors will be looking for Facebook to bump up its revenue and justify its lofty valuation. There are two ways to do that: get more users or find new ways to make bank off the ones they have.

The first of those is tricky. Convincing holdouts and the three-quarters of American seniors not already on Facebook to sign up, and finally breaking into the Chinese market would undoubtedly boost those user metrics. Yet those are difficult propositions and Facebook may be more likely to try and make more cash off its existing community.

As it stands, Facebook makes the bulk of its revenue from advertising and revenue share agreements with the likes of Zynga. However, it’s playing around with new ways of making money, such as the highlighted posts feature it was testing in New Zealand last week.

It seems more ads will seep into your News Feeds, with sponsored stories and endorsements from friends. The question is, how much can Facebook disrupt the current, relatively pure experience, before it creates an opportunity for a competitor? (And even if it does, how will that competitor make money?)

The company noted in its S-1 filing with the Securities and Exchange Commisison that, “The loss of advertisers, or reduction in spending by advertisers with Facebook, could seriously harm our business.” Losing around $10 million in General Motors ad spending Wednesday isn’t helping.

Facebook’s mobile focus

For everyday Facebook users, the most significant thing that’s likely to change is the mobile experience.

Facebook’s mobile apps are slow and clunky. However, with much of our Facebook activity moving away from the Web and onto mobile phones, mobile is an issue the company admits it needs to address. Making money off mobile is a problem too.

Social ads are an important focus for Facebook here. Your location data might be used to offer more personalized ads too. Normal display ads don’t work as well, due to phones’ smaller screens. Facebook might also turn to its new App Center to juice up its mobile revenue, so expect the company to start pushing that a little more aggressively.

Zuckerberg still rules the roost

As mentioned above, you will have the right to vote in corporate matters if you can get your hands on some Facebook stock. But your vote may not count for much.

Thanks to some deals struck through Facebook’s various rounds of financing, CEO Mark Zuckerberg holds over half of the voting power within Facebook. That’s despite his owning around under a third of the company after the IPO.

In other words, it’s still Zuck’s house and if he wants to rearrange the board of directors, buy another company (like Instagram), or install a Facebook office on the moon, he can do so. If he ever wants to start charging you to use Facebook, he can do that too—though it’s unlikely.

Not that much changes here, in all honesty. Though if you’ve pledged your allegiance to the state of Facebook, it’s worth noting that you’re living in a (so far) benevolent despotism.

Down the road, Facebook might offer new features like a fully fledged search engine, though that’s not directly tied to the IPO. For now, expect better ways to access Facebook through mobile and Facebook coming at your wallet.

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This site lets you challenge the pundits and predict Facebook’s IPO closing price

 

Facebook’s upcoming IPO is dominating tech investors’ discussions and thoughts, but you can get involved in the evident too, even if you’re not one of those ready to put cash on the table for a slice of the global social network sensation.

Facebookipodayclosingprice.com is a site that’s been pulled together — in a fantasy football-style — to allow experts and ordinary punters to mix together and place bets on Facebook’s share price at the closing bell (though, ironically, sign-in to the site is via Twitter.)

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