Thursday, May 24, 2012

Structured Warrents Indicate Facebook at $22 by Year End (FB)

The stock is up 33 cents at $32.33.
From Bloomberg:
Facebook at $22 Seen in Europe’s Structured Warrants
Facebook Inc. (FB) may fall more than 42 percent below its initial public offering price by the end of the year, according to bets by structured-product investors.

The most actively traded structured products tied to Facebook since its IPO have been so-called put warrants, whose buyers profit if the shares drop below a pre-defined level, in some cases as low as $22, data compiled by Bloomberg show. UBS AG (UBSN), Commerzbank AG (CBK) and Julius Baer Group Ltd. (BAER) are among lenders that listed 1,504 warrants and certificates in Europe linked to shares of the social networking site that were offered at $38.

Since raising $16 billion on May 17 in the biggest technology IPO of all time, Facebook has tumbled, closing at $32 yesterday. The U.S. Securities and Exchange Commission and the brokerage industry’s watchdog both said they may review the deal, after a person familiar with the matter said Facebook and Morgan Stanley, the lead underwriter, increased the offering price to persuade the company’s backers to sell more of their stock.

“There has been strong demand on the put side, with the ratio between puts and calls at around 70/30” with “some people expressing deep downside views,” Heiko Geiger, the head of public distribution for Germany and Austria at Bank Vontobel AG in Frankfurt, said in an interview yesterday.

Ashley Zandy, a spokeswoman for the Menlo Park, California- based company, declined to comment.

Best Seller
Bank Vontobel’s best-selling Facebook-linked product is a put warrant that will reward investors if the shares are below $22, the so-called strike price, in December, said Geiger. Put warrants give investors a cash payment depending on how far a stock falls below a set level.
Julius Baer sold the securities with the largest trading volumes, two put warrants with strikes of $35 and $30 on the Scoach exchange in Zurich. Investors traded 402,000 contracts yesterday valued at $335,780 of the former and 603,000 warrants for $322,620 of the latter, data compiled by Bloomberg show....MORE