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Peter F. Way, CFA
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Peter Way Associates provides investment professionals and individual investors with forward-looking, market-derived Risk:Reward tradeoff assessments for widely held and actively traded common stocks and Exchange Traded Funds (ETFs). The firm maintains daily the odds of higher and lower next 3... More
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  • Vampire Squids' Forecasts Of FB Facebook IPO Coming Stock Prices 0 comments
    May 16, 2012 1:49 PM

    About: FB IPO Stock Price Forecasts Market-makers

    This Friday there will be one principal question in the minds of millions of observers, waiting to be answered. How high will the price of Facebook stock be driven by eager owners before the trading day is over?

    Lots of guesses are being made beforehand, but because of the scale of the offering and the lack of any good comparables in circumstances, no one really knows.

    And the game doesn't stop at the close on Friday. With ample media coverage and a weekend to ponder, many new players may consider participating. And then the scene is quite different, because there will have been a real market starting point and test.

    Up till now there has been no valid test of investor appetites, no basis for professional market-makers to assess where their big fund clients that got IPO allocations might be willing to flip their stock to an overenthusiastic investing public. On Friday that changes.

    The Vampire Squids and their market-making cohorts are good at feeling out their clients' attitudes. Just for example, look at how well they read the upside and downside price limits on a leveraged ETF of Latin American stocks each day of the past 6 months.

    The vertical lines of the picture are daily forecasts of price ranges for LBJ that the pros believe are likely to be encountered in coming weeks and months. Likely enough so that they will spend some of what could be profits in their pockets to protect themselves from losing far more from adverse price moves on at-risk stock positions that had to be taken.

    In so doing, they leave footprints in the market that our firm translates into forecasts, same as we have done for a decade and more on over 2,000 widely held and actively-traded stocks and ETFs.

    Facebook shares as yet have no such history. But as a public service we will produce the pros' evaluations without charge for a while, to give less well-informed investors a more even sense of what other knowledgeable players are expecting.

    Ranges of possible price change from the Friday close should be available from this site shortly after the end of day's trading and through the weekend to the Monday opening. We expect to update the forecasts at each end of day next week.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: IPO
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