Underwriters likely to 'bump up' Facebook image with "quiet period" coming to end
Toronto, June 27 (ANI): With the 40-day "quiet period," ending, under which underwriters of an initial public offering are barred from publishing research opinions on the stock, the 30-plus investment banks that were in the underwriting syndicate for the 16 billion dollar Facebook's IPO may benefit the firm after analyzing the reasons behind the firm's bungled flotation.
A veritable who's who from Wall Street's most powerful firms are expected to unleash a torrent of reports analyzing Facebook's stock and the company's business prospects, weeks after the stock's disappointing debut raised questions about whether the underwriters disclosed sufficient information to investors.
Market watchers said that they can expect the recommendations on the stock to be tilted towards the positive.
"The past few trading days, the stock has gone up, not for any fundamental reason. There's an expectation that we're about to see several outperform [recommendations], and maybe even some strong buys," The Globe and Mail quoted Scott Sweet, head of IPO Boutique, an IPO-focused investment advisory firm based in Florida, as saying.
Despite investment banks' protestations that their equity research is separate and fully independent from their underwriting businesses, history suggests that research from IPO underwriters is typically skewed towards the bullish.
The tendency for underwriters to be bullish on the stocks they've helped sell could boost Facebook's stock price in the short term, the paper said.
"It will inevitably contribute to positive sentiment. It allows for positive news flow to enter the market," said analyst Brian Wieser of Pivotal Research in New York, adding that not only the underwriters but Facebook itself are now free to talk about the company's prospects.
Ipreo, a New York-based market intelligence firm, published a report last year showing that out of 700 U.S. IPOs it looked at from 2006 to 2011, only seven received "sell" ratings on average from analysts that initiated coverage in the two weeks following the quiet period. And all but one of those stocks had gained 50 per cent or more from their IPO price. (ANI)
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