FB IPO: Nasdaq offers 62 mn compensation

Facebook had began trading publicly on May 18 following one of the most anticipated stock offerings in history. But the stock8217;s public debut was marred by technical glitches at the Nasdaq Stock Market that delayed trading.

On the opening day,the orders failed to be executed,or in trader parlance 8220;print8221;. Nasdaq was unable to deliver trade execution messages until mid-afternoon,leaving traders in the dark about whether their orders had gone through.

The proposed voluntary accommodation programme will be filed with the Securities and Exchange Commission SEC,Nasdaq said.

8220;We deeply regret the problems encountered during the initial public offering of Facebook,8221; NASDAQ OMX Group Chief Executive Officer and President Robert Greifeld said.

The independent Financial Industry Regulatory Authority FINRA has agreed to evaluate claims submitted by firms under the voluntary accommodations program.

All claims will be paid in cash,simplifying the process and eliminating trading credits from the earlier proposal.

Nasdaq expects to compensate all the accommodation plan within six months.

8220;We failed to meet our own high standards based on our long history of providing outstanding technology to our members and exchange customers. We have learned from this experience and we will continue to improve our trading platforms,8221; Greifeld added.

Nasdaq8217;s offer,however,falls far behind the USD 100 million in losses that wholesale trading firms which trade on behalf of online retail brokerages like Knight Capital,Citadel,and units of UBS and Citigroup demanded.

No room for error in Facebook8217;s debut quarter

Facebook Inc faces immense pressure to beat Wall Street8217;s financial targets when its delivers its inaugural quarterly earnings report next week,hoping to wash away the bad taste left with investors from a soured IPO.

The No. 1 social networking company8217;s second-quarter report on July 26 will be scrutinized by investors looking for clues on the health of its business,which is experiencing a sharp slowdown in revenue growth and mounting questions about its advertising sales.

With a rich multiple that gave Facebook the distinction of being the first U.S. company to go public with a valuation of more than 100 billion,the company headed by 28-year-old Mark Zuckerberg has little room for error.

8220;If they miss,it would be catastrophic for the stock,8221; said Michael Binger,a portfolio manager with Gradient Investments.

8220;This is a very important earnings quarter for them. It will establish in people8217;s minds how they think of the company,8221; said Binger,whose firm does have a position in Facebook.

The bar has been lowered since Facebook warned that a shift in users to mobile devices 8211; where its ability to earn revenue is still nascent 8211; will hinder growth in the short run.

Analysts,on average,expect revenue in the second quarter to grow 28 percent to 1.15 billion. During the same period a year ago,Facebook more than doubled its revenue.

With Facebook8217;s stock still trading at three-quarters its 38 IPO price,executives need to address a litany of concerns about the business,such as the efficacy of its online ads and the company8217;s nascent efforts in mobile advertising.

Investors say Facebook is unlikely to be able to deliver the sort of numbers that can propel its stock back to debut levels,but the risk of triggering a slide if the company disappoints Wall Street is high. Facebook8217;s stock still trades at a rich 57 times forward earnings,compared with Apple Inc8217;s 13 times and Google Inc8217;s 14 times.

8220;Facebook is probably going to come up with one or two revolutionary streams that are going to bump up its revenue,8221; said Bill Lee,an angel investor who backed companies,including electric carmaker Tesla Motors Inc and social media site Posterous,which was recently acquired by Twitter. But 8220;all the magic they can continue to deliver is already priced in.8221;

SLOWING GROWTH

More than half of the 36 financial analysts now covering Facebook rate the company a Hold,Underperform or Sell 8211; disproportionately high given that Wall Street analysts historically favor Buy ratings.

The three lead underwriters of the IPO 8211; Morgan Stanley,Goldman Sachs and JPMorgan 8211; forecast second-quarter earnings per share of between 10 cents and 11 cents,lower than the Street average of 12 cents,minus IPO-related stock compensation charges,according to Thomson Reuters I/B/E/S.

Thomson Reuters StarMine8217;s SmartEstimates suggests that Facebook will post adjusted earnings of 10.4 cents per share.

8220;It gets back to 8216;How predictable are these companies8217; results going to be when I8217;m forecasting out pretty significant growth to be able to justify the valuation?'8221; said Ryan Jacob,chairman and chief investment officer of Jacob Funds,who does not own Facebook shares.

Facebook,which generated more than four-fifths of its revenue from advertising in 2011,has stepped up efforts to rebuild its revenue momentum,rolling out a raft of new advertising features and providing more details about the effectiveness of its ads.

TBG Digital,which helps marketers advertise on Facebook,released a study this week that found the average price of Facebook ads had jumped 58 percent since last year. That is partially due to recently released mobile formats,it found.

8220;Our clients aren8217;t spending 75 percent of their budgets on Facebook,8221; said David Jones,Global CEO of advertising agency Havas. But he noted that 8220;there are very few clients who we are talking to who are negative on Facebook.8221;

GUIDANCE QUESTION

With over 900 million users,Facebook is the world8217;s largest social networking company,challenging established Web companies for consumers8217; online time and for advertising revenue.

For Facebook,the first date with Wall Street will mark an important test for the company8217;s top brass to try to dispel some of the skepticism. Investors will want to hear from Zuckerberg 8211; who wields majority control 8211; but the company has not said if he will take questions on the day.

8220;A miss is a miss and it wouldn8217;t be good either way,especially for your first quarter out of the gate,8221; said Colin Sebastian,an analyst with Robert W. Baird.

But the context will be key.

8220;If it8217;s related to shift in mobile,but the mobile monetization is improving,that8217;s different than just a miss because advertisers are leaving Facebook.8221;

And he said that many investors will be particularly interested in the trends the company is seeing as marketers take advantage of Facebook8217;s mobile and other advertising features.

While most expect Facebook to follow the lead of Google and Amazon.com Inc and abstain from offering financial forecasts every quarter,it may address the current concerns about its business by providing additional color and outlook.

8220;This first time out,I think they have to give some sort of guidance,8221; said Robert Bacarella,manager of the Monetta Fund,which does not own Facebook shares. 8220;You pacify the near term and say 8216;Here8217;s where we8217;re going.8217; But then you set the table up to say: 8216;We8217;re thinking about whether or not it8217;s wise give guidance going forward.8221;

For all Facebook8217;s efforts to woo Wall Street,the company8217;s biggest job remains building its relationship with advertisers,such as San Francisco8217;s Public Bikes.

8220;Whenever we have a new bike shop selling our bikes in a particular city,I8217;ll run a targeted Facebook campaign8221; in that city,said Dan Nguyen-Tan,Public Bikes8217; vice president of sales and marketing.

The ability to reach specific groups of Facebook users based on where they live and their interests 8211; such as healthy lifestyles or environmental interests 8211; is an important advantage of Facebook8217;s advertising system,Nguyen-Tan said.

But he acknowledged that Public Bikes spends more money advertising with Google,where it is easier for the company to reach people interested in buying a bicycle.