Structured products betting on the future stock price of Facebook Inc. (FB) are being sold by banks as the social network raises as much as $16 billion in the largest initial public offering by a technology company.
Societe Generale SA (GLE), UBS AG (UBSN), Commerzbank AG, Julius Baer Group Ltd. (BAER) and Bank Vontobel AG have this month either listed or announced plans for 180 warrants and more than 125 certificates linked to Menlo Park, California-based Facebook, according to data compiled by Bloomberg.
“As the Facebook story is so hot all over the world we expect clients to immediately go into the stock through derivatives after the IPO,” said Markus Jakubowski, vice president in derivatives sales at Societe Generale in Frankfurt. The French bank plans to list around 35 warrants and certificates in Germany with a variety of strike prices, the level at which the securities profit or not, he said.
Facebook boosted the offering’s price range to as much as $38 a share this week, indicating a market value as high as $104 billion. Existing holders will offer 241.2 million shares, bringing the total on offer to 421.2 million, with Accel Partners, the biggest seller in the IPO, raising the amount it’s selling by 28 percent, while Goldman Sachs Group Inc. more than doubled its shares on offer.
Broker Lang & Schwarz Tradecenter AG listed six warrants linked to Facebook shares on the Scoach Europe structured products exchange in Frankfurt yesterday. The securities represent an option to buy or sell a certain number of shares at a specific price before a given date.
Carsten Luetke-Bornefeld, head of trading at the Dusseldorf-based firm, said he expects strong demand from local investors.
Lang & Schwarz listed two “put” warrants that expire in either September or December and profit if Facebook’s shares are below $60, as well as four “call” products offering gains if the shares rise above $60 and $70. A warrant maturing in September, which will be profitable if Facebook shares climb above $70, cost 34 euro cents ($0.43) yesterday.
Los Angeles-based Wedbush Securities, the first firm to rate Facebook after it announced plans to sell shares, set a 12-month price target of $44 for the company on May 5.
EFG Financial Products AG, a Zurich-based structured products distributor, said after the offering it will add Facebook shares to a basket of 10 social media companies that are tracked by a certificate that has traded on Scoach in Zurich since last month.
To contact the reporter on this story: Alastair Marsh in London at firstname.lastname@example.org