Portfolio managers would buy Facebook stock, at lower price
By Jessica Toonkel
NEW YORK (Reuters) - Facebook Inc's 26 percent slide from its initial offering price may have investors who got in on the ground floor feeling resentful, but some fund managers are eager to see shares dip even further.
Technology glitches and a communications breakdown marred Facebook's $16 billion IPO on May 18, leading many observers to believe the initial stock was overvalued, contributing to its free-fall over the past two weeks.
Still, the company isn't value-free and at some price, shares represent an opportunity, portfolio managers say.
"There is no company in the Internet area that has gained such a huge market share in such a short period of time," said Mark Hawtin, portfolio manager of the $64 million GAM Star Technology Strategy, a portfolio for offshore investors launched in February 2011. "It's absolutely a value asset in the Internet world."
Hawtin believes $18 to $25 a share "would be a great entry point."
While many analysts are concerned about Facebook's ability to generate revenues from advertising, Hawtin believes the model for the social media website will eventually be fee-based, which could prove very profitable.
"I think they will be the launch page for people to get to the Internet," he said. Under a fee-based structure, vendors would pay Facebook for every user that goes to their site from Facebook.
For example, if Netflix Inc paid Facebook $10 for every person who came to their website, that could be $10 billion in revenue for Facebook, Hawtin said. Continued...