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Henderson's O'Gorman blasts 'disastrous' Facebook IPO
Overinflated initial public offerings are damaging trust in the tech sector, says Henderson Global Technology fund manager Stuart O'Gorman.
(Update) Buying into Facebook cost the fund 0.005% rather than 0.5% of performance. Apologies for the inaccuracy
Facebook's overinflated initial public offering (IPO) has left many retail investors 'horrifically burnt' and gives the whole technology sector a bad name, according to Henderson Global Technology fund manager Stuart O'Gorman.
O'Gorman and co-manager Ian Warmerdam bought into Facebook's IPO in May at $38, because they knew the offer would be heavily oversubscribed, and sold out of the stock just over 24 hours later.
Even though they avoided the steep share price falls that were to follow, buying and selling Facebook still cost the fund, which is a pick of Citywire Selection, about half a basis point in performance terms.
Giving the sector a bad name
'IPOs like Zynga, GroupOn, Ocado (OCDO.L), Prometheus and Facebook have all been disasters for retail investors... All the hype is created by the hedge funds and banks that float them to push the deal through, and it is bad for the tech sector as a whole,' O'Gorman said.
'It gives the whole sector a bad name and means many perfectly good tech companies may not be able to get the funding they need in the future.'
At the time of the float, O'Gorman calculated that Facebook's shares were worth at best in the low 20s, and with Facebook's share price standing at $21 on 1 August, O'Gorman said he would only consider adding again if it fell below $20 per share.
'It might become interesting below $20, but only if we see definite signs that they are able to monetise their user base. If they can do that, they would become much more valuable. At the moment there are cheaper ways to access it, such as through buying mail.ru. It was not long ago we had the tech crash and now we are seeing all this craziness again.'
Growing concerns about Apple and Intel
O'Gorman has reduced his stake in Apple over recent months, and it now makes up 9.75% of the fund, just under the 10% limit. Nevertheless, the fact that Apple's share price has jumped 51% in 2012 and represents 16.5% of the index means it has caused the fund to lag its benchmark this year.
'We did our first-ever sale of Apple recently over concerns on delays with the iPad 3. The company is no longer a no-brainer, it is now more of a "yes, this will probably work".'
Elsewhere, O'Gorman is keeping a watchful eye on the growth of competition to Apple and Samsung further down the supply chain, and he says an 'arms race' is developing between the major semiconductor makers: TSMC, Samsung and Intel.
Reducing TSMC and Intel
Big overweight positions to TSMC and Intel have now been reduced, although the overweight to Samsung has been retained for now.
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