Facebook is mature co; 8% rise is great in tough mkt: Ross

In an interview to CNBC-TV18, Richard Ross, global technical analyst, Auerbach Grayson, says, in his analysis of Facebook's IPO, that the company is not a fly-by-night unit that was common during the tech bubble of the past decade.

He explains that the 8%-rise posted by the stock to date is impressive in the context of the fluid economic environment in the US and Europe. He adds that the state of markets across the globe, especially in emerging economies, is great troubling. Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: Before I get to asking you your take on the listing price, tell me what's happening on the NASDAQ? Is trading trouble the reason why Facebook's listing was delayed?
A: We have seen some technological snafus, if you will, over the past few months, but on the same token let's keep in mind the size and the enormity of this deal and the importance to the market itself.
And rather than to try and disparage NASDAQ in anyway, we should applaud them for really pulling this deal off and making sure that everything operated smoothly rather than turn into a real technological disaster.
So, glitch is a good word, but in my opinion, a job well done by NASDAQ. We have already traded 286 million shares. This is one of the largest IPOs in the history of the US and the markets are on shaky footing not just in the US, but around the world.
So at the end of the day, you would have to view it as a success from a market-structures viewpoint. Q: Were you surprised Facebook listed at USD 42 or did you always expect it would sink under that USD 104-billion valuation weight that it was shouldering?
A: It was always a very interesting price clearly and fully valued. It's very important to get the pricing right. JD Moriarty, one of the sharpest guys in the business, gave his perspective where he laid out clearly the balance between the institutions, the corporate sector, the issuer (Facebook) and retail investors who want to come in and get a piece of the IPO that they weren't perhaps able to get with shares on the deal.
So there are a lot of different forces to balance and I think the fact that the stock is up 8% on the back of the deal shows that it was relatively fairly-valued.
But as we have seen in the past, sometimes high valuations get even higher. When Google came public, people scoffed at that valuation and look what's going on with that company.
So let's not rule anything out, Facebook is a very dynamic company and certainly a behemoth in the technology industry. So you can't say anything is too high, it's a little too early to tell. Q: What you make of today's price and what that indicates about retail participation on listing day? There is unconfirmed news that about 20% of the issue is allocated to retail investors. But at USD 40 and USD 41, do you think on listing day, retail interest has been sustained?
A: For a company like Facebook, it is a clearly brand recognition; it's not a surprise that you are getting that retail interest. There are not many companies about whom a major motion picture is made.
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So once again its brand recognition that is clearly fueling retail interest. It's one of the most well-known brands in technology and on the Internet at this point, not just in the US but across the globe.
It's not a surprise to see that retail interest and the fact that the stock is up 8% now should remind us of the heydays when big tech IPOs would open and it would triple or quadruple and retail investors were paying many multiples above the original offering price where the investment banker has actually thought the company should be valued. Q: If the price is only at USD 40 or USD 41 does that indicate that retail interest has petered off today?
A: No I don't think so. I think this is one of the situations which is very liquid and the company is so large. Let's keep in mind that this isn't one of those fly-by-night operations common in the late '90s during the tech bubble when investors didn't really know what they were buying into.
This company is very mature from a technology standpoint and has been trading on very different public markets. Facebook has been trading on a lot of secondary over the past two years.
There has been some price discovery, albeit not on a national public exchange, but shares have been trading hands in the private markets, so that's providing a better sense of value and has enabled underwriters to price it at a level which is appealing to both retail and institutional investors at these levels. Q: What do you make of the week and the tentative note that it’s closing on?  It's been a very difficult week for Europe and the worst weekly decline since November 2012. How have the US markets tackled the news from Europe?
A: I think it's very troubling. I don't think the markets tackled them particularly well. There has some significant damage across emerging markets. We are not even all the way through the month and already markets like Russia are down over 13%, Brazil down over 12%, India's Nifty is down almost 7% and China is down over 13%.
So it's been one of the worst months in recent memory from a global standpoint and of course the S&P 500 is down 6% midway through the month.
'Sell in May and go' works once again, though almost inexplicably, but clearly the markets are on shaky footing, investors seem to be waiting around once again for quantitative easing and for a government bailout in US and in Europe and that's not a great thing.
Waiting for help everytime the market gets into trouble can be a dangerous game to play because if that help doesn't arrive, it doesn't leave you much to hang your hat on.