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business newsDecoding Wall Street: Facebook Frenzy
By
Brian Sozzi
Feb 02, 2012 11:40 am
These are the must-know terms that will surface in every article about Facebook until new terms are released following the IPO.
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Front Page: “Facebook Frenzy”
Headline decoding: Your second home (that you wished you owned) is about to sell some stock.
Facebook is an experience. More precisely, it’s a social experience between a person and another person, or a person with a company -- an example being Walmart (WMT). Facebook is a feeling that the physical barriers that exist between sharing ideas with a colleague across the Atlantic are just that -- physical barriers. If you've been hiding under a rock for the past two years and missing Facebook-going-public-hype galore (sound smart: IPO = initial public offering = stock presented to market for first time, like Simba from The Lion King to the forest of friends), the social media site that is always on your mind is poised to do a stock offering. Sometime this week Facebook will continue to be all the things we mentioned, but also a company that is officially on track to having loads of demanding shareholders from around the world as well as Wall Street friends who will opine on whether the stock is worthy of investment and find ways to siphon money from the company’s savings account.
Considering this is indeed a special moment for American business (a success story, if you will) and a big deal for those vulture bankers on Wall Street as well as investors more broadly, my colleagues and I have devised the Facebook Toolbox! These are the must-know terms that will surface in every article about Facebook known to man until new terms are released following the IPO. Note that Facebook was granted its own corner on the Wall Street Journal homepage, so this is not small-potatoes stuff.
Facebook IPO Toolbox
- Valuation: The dollar value that investors think Facebook is worth, discovered by people buying the stock on IPO day or buying it and then dumping it. To those who dump the stock, be mindful that you may get the boot from Facebook as a user…just kidding.
- Cash out: The process in which founding shareholders decide to sell stock because they are so darn filthy rich that it’s OK to officially make a couple of bucks (sound smart: these rich people will likely say they’re looking to diversify their holdings).
- S-1: We assure you this is not a rocket ship. It’s the first document that will be filed by Facebook, explaining what this black hole of a website does and how it earns money from what it does.
- Lead underwriter: Morgan Stanley (MS) is the luckiest damn investment bank in the world, for it has won the responsibility of bringing Facebook to the stock market (sound smart: public markets). Morgan Stanley has won this honor, and in the process, will mint money from its IPO skills.
- Roadshow: Bankers packing up their suitcases and visiting major clients to unload Facebook shares. They are on the road, and they're showing just how amazing the company is, and can continue to be, into the future.
- Overpriced/hype: Commentators apply this term to stocks they think are unworthy of their valuation (see above).
- Three VIPs: Mark Zuckerberg (CEO, founder; tech billionaire); David Ebersman (CFO, or the financial guy); Sheryl Sandberg (COO, operations guru who has gained rock-star status).
No positions in stocks mentioned.
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