Horizon, Host: Ted Simons

May 17, 2012


Host: Ted Simons

Facebook IPO


  • Wayne Stutzer of RBC Wealth Management discusses the initial public offering of Facebook shares on Wall Street.
Guests:
  • Wayne Stutzer - RBC Wealth Management
Category: Business/Economy   |   Keywords: Facebook, IPO, stocks, wall, street, management, ,

View Transcript
Ted Simons: TOMORROW WILL BE A NOTABLE DAY ON WALL STREET. FACEBOOK WILL MAKE ITS INITIAL PUBLIC STOCK OFFERING AT $38 A SHARE, WHICH MEANS EARLY INVESTORS IN THE SOCIAL MEDIA COMPANY COULD TAKE IN OVER $18 Billion from the IPO. Here to talk about what's Shaping up as one of the largest STOCK OFFERINGS IN HISTORY IS WAYNE STUTZER, SENIOR VICE PRESIDENT AND FINANCIAL CONSULTANT FOR RBC WEALTH MANAGEMENT. HOW BIG A DEAL IS?

Wayne Stutzer: IT WILL PROBABLY BE THE LARGEST IPO, INITIAL PUBLIC OFFERING THAT THIS COUNTRY HAS EVER WITNESSED BEFORE. SO IN THAT SENSE IT'S A HUGE DEAL.

Ted Simons: $38 A SHARE SOUND RIGHT TO YOU?

Wayne Stutzer: MOST OF THE PROFESSIONALS, PROFESSORS OF ECONOMICS AND ANALYSTS ARE SUCH SAYING AT THAT PRICE, WHEN, IF IT COMES OUT 245 WAY, WHEN YOU LOOK AT WHAT THE MARKET CAPITALIZATION, THE STOCK PRICE TIMES THE NUMBER OF SHARES THAT ARE OUTSTANDING AFTER THEY FLOAT THAT STOCK, CREATE $100 BILLION ENTITY, THEY BASICALLY FEEL THAT'S PRETTY MUCH PRICED TO PERFECTION.

Ted Simons: YEAH, I THINK $104 billion. Down to the four. You are talking like $18 billion in cash could be raised just in one fell swoop. Huh 1234.

Wayne Stutzer: Yeah.

Ted Simons: What are they going to do with all that money?

Wayne Stutzer: That is a good question actually. Right now they will sit on it. It will also gives people like Mark Zuckerberg instant wealth. Real dollars. Not just paper money, real dollars.

Ted Simons: Let's talk about some options here. Acquisitions could they start taking some of these folks that might be nipping at their heels and say, come under the umbrella?

Wayne Stutzer: THEY CAN. BUT USUALLY WHEN THESE BIG DEALS COME ABOUT THE FIRST THING THEY WILL DO IS SIT ON THE CASH FOR A WHILE. FROM THERE THEY WILL PROBABLY MAKE SOME DECISIONS. BUT PREDOMINANTLY IT ALLOWS THOSE WHO HAVE BEEN IN THE COMPANY FROM ITS INCEPTION TO REALIZE SOME OF THAT HARD WORK WITH HARD CASH.

Ted Simons: AND SOME OF THOSE PEOPLE, TALK ABOUT ISSUES, WHAT YOU DO WITH THE MONEY NOW THAT YOU GOT IT, I WOULD ASSUME SOME OF THOSE MONEY WILL BE TO SAVE, RECRUIT AND RETAIN SOME OF THESE EMPLOYEES. THESE ARE MULTIMILLIONAIRES. THEY MAY HAVE SOME IDEAS FOR THEIR LIVES.

Wayne Stutzer: THEY MAY BE INSTANT BILLIONAIRES.

Ted Simons: THEY CAN START THEIR OWN COMPANIES. THEY CAN WANDER OFF SOMEWHERE BUT THEY WILL HAVE TO STICK AROUND THE OFFICE.

Wayne Stutzer: SPAWN OTHERS. I THINK THAT IF YOU LOOK AT THIS AND ASK YOURSELF WHAT DOES THIS REALLY MEAN FOR AMERICA? WHAT IT MEANS IN MY MIND IS THAT THAT SPIRIT OF ENTREPRENEURSHIP THAT YOU CAN START AND GROW A COMPANY, IS THERE. MARK ZUCKERBERG BECOMES SOMEBODY THAT IS IDOLIZED BY MANY, MANY YOUTH PEOPLE WHO SAY, IF HE CAN DO IT, WHY CAN'T I DO IT? TO ME AGAIN IT INDICATES THAT IN AMERICA, IT SORT OF IS COOL TO BE A MILLIONAIRE OR BILLIONAIRE. IT HASN'T BEEN LIKE VOTED OUT.

Ted Simons: AND THIS HAPPENS RIGHT ON THE HEELS OF A STORY THAT KIND OF ROCKED WALL STREET WHICH IS THE J.P. MORGAN CHASE. YEAH. HOW DOES THAT, IN TERMS OF JUST MOOD AND CONFIDENCE AND OPTIMISM, THAT PLAY A FACT THERE ARE?

Wayne Stutzer: YES, IT DOES. IN FACT, TO ME, I WOULD LOVE TO TELL STUDENTS STUDYING TODAY TO STOP TRYING TO BECOME A FINANCIAL ENGINEER. RATHER BECOME A PHYSICAL ENGINEER. TO CREATE. SO IN SOME WAYS, YOU KNOW, WE HAVE TWO CONTRASTS HERE. J.P. MORGAN CHASE AND THAT TRADE, FINANCIAL ENGINEERING, WHAT DID THAT DO TO CREATE A CREDIT DEFAULT WHATEVER? DID IT CREATE JOBS OR WEALTH IN AMERICA? ABSOLUTELY NOT. FACEBOOK ON THE OTHER HAND CREATED A REAL ENTITY. AND SO I HOPE THAT PEOPLE EMULATE MARK ZUCKERBERG AND NOT THE WHALE OF LONDON.

Ted Simons: LET'S TALK ABOUT WHAT FACEBOOK DOES NOW TO MAKE MONEY FOR ITS SHAREHOLDERS.

Wayne Stutzer: WELL, THAT'S GOING TO BE THE BIG QUESTION. THAT'S ABSOLUTELY CORRECT. OBVIOUSLY, THERE'S GOING TO HAVE TO BE ADVERTISING. THAT'S BASICALLY HOW THEY MAKE THEIR MONEY. THE PAST WEEK YOU HEARD THAT GENERAL MOTORS HAS DECIDED THAT THEY ARE GOING TO PULL THEIR CONTRACT, OR A BIG PART OF THEIR CONTRACT WITH FACEBOOK BECAUSE THEY DIDN'T REALLY SEE IT HAVING AN IMPACT ON THEIR SALES. ORDINANCE, FORD MOTOR COMPANY SAID, YOU KNOW WHAT? WE'RE GOING TO BEEF UP OUR WORK WITH FACEBOOK BECAUSE WE DO SEE IT HAVING AN IMPACT ON OUR SALES. WHERE THEY ARE GOING TO GET THEIR MONEY? THROUGH COMPANIES LIKE THE G.M.'S AND THE FORDS AND OTHER COMPANIES ADVERTISING AND TRYING TO ATTRACT BUSINESS.

Ted Simons: IS THERE A DIFFERENCE WHEN YOU ARE DEALING WITH A SOCIAL MEDIA COMPANY, BALANCING WALL STREET DEMANDS WITH USER DEMANDS? YOU GOT A LOT OF FOLKS THROUGHOUT THAT THINK THEY ARE PART OF SOMETHING BIG RIGHT NOW.

Wayne Stutzer: YOU DO. NOW YOU WILL HAVE OPEN SHAREHOLDERS MEETINGS AND THE SCRUTINY OF WALL STREET AND THE SCRUTINY OF SOME THAT MIGHT HAVE 50 SHARES, THEY CAN COME TO A BOARD MEETING, AN ANNUAL MEETING, EXCUSE ME. NOT A BOARD MEETING. WHEN YOU GO PUBLIC THE SPOTLIGHT IS FULLY ON YOU.

Ted Simons: YES.

Wayne Stutzer: IT'S DIFFERENT THAN BEING PRIVATE. MARK ZUCKERBERG HAS HAD THIS COMPANY FOR SIX OR SEVEN YEARS. IT'S NOT LIKE HE'S BRAND-NEW AT THE TABLE. BUT THIS WILL BE A WHOLE NEW ASPECT FOR HIM WHERE HE HAS TO NOW ANSWER QUESTIONS TO SHAREHOLDERS.

Ted Simons: IS THIS A WHOLE NEW BENCHMARK FOR TECHNOLOGY, FOR SOCIAL MEDIA IN THE MARKETPLACE? THINKS BRAVE NEW WORLD HERE?

Wayne Stutzer: WELL, WHAT IT DOES IN SOME WAYS, YES. IT MOTIVATES OTHER COMPANIES. YOUTUBE, YOU, TOO, COULD BE A MARK ZUCKERBERG. IF YOU WORK HARD AND ARE DILIGENT, SOME DAY, YOU, TOO, CAN BE A MULTIMILLIONAIRE. THAT'S WHAT MAKE AMERICAS GREAT.

Ted Simons: TALK ABOUT A WHALE. THE FACEBOOK WHALE, SWALLOW IT LIKE I MENTIONED EARLIER, ACQUISITION. YOU CAN START YOUR COMPANY AND SAY, HEY, MARK, WHAT DO YOU THINK? TAKE A LOOK.

Wayne Stutzer: ONCE YOU ARE AT THE TOP OF YOUR GAME THAT'S WHAT MAKE CREATIVE DESTRUCTION IN THIS COUNTRY SO MARVELOUS. THERE WILL BE PEOPLE 2458 SNIP AT THE FEET OF FACEBOOK JUST LIKE GOOGLE IS AT THE TOP OF ITS GAME. CAN IT STAY THERE? APPLE, CAN IT STAY THERE? WE HAVE SEEN JUST IN THE AREA OF TELECOMMUNICATIONS, TED, WHAT HAPPENED TO NOKIA? WHAT HAPPENED TO BLACKBERRY? RIGHT? NOW WE GOT APPLE. THE DROID AND GOOGLE. WHO KNOWS WHAT WILL BE NEXT?

Ted Simons: CRITICS OF FACEBOOK SAY WHAT HAPPENED TO MYSPACE? YOU NEVER REAL KNOW.

Wayne Stutzer: THAT'S WHAT I LOVE ABOUT THIS COUNTRY.

Ted Simons: ALL RIGHT. WELL, WE WILL WATCH TOMORROW. GOOD TO HAVE YOU HERE, WAYNE. THANKS FOR JOINING US.

Wayne Stutzer: YOU BET.

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