Small-Cap Stocks with Run-ups Prior to Facebook's IPO
It's probably safe to say that almost all traders and investors know that social media darling Facebook will price the most anticipated IPO of all time on May 17 and commence trading the next day. Shares of Mark Zuckerberg's company are expected to price in a range of $28-$35 and when the stock debuts on the Nasdaq under the ticker "FB," Facebook could have a market cap of close to $100 billion.
While that would make Facebook more valuable than roughly half of the stocks in the Dow Jones Industrial Average, the Facebook IPO fervor is also creating a stir among small-caps that are either direct social media plays or have some exposure to the budding new industry.
Amid slowing growth and a rich valuation, investors may do well to wait for Facebook shares to prove they have the look of a legitimate winner. In the meantime, there are plenty of small-cap plays that are benefiting from the anticipation of the Facebook IPO. Consider the following names.
Renren (NYSE: RENN) As the Facebook of China, Renren is one of the most logical derivative plays on the Facebook IPO. China is the world's largest Internet market and Chinese Internet users are currently barred from accessing Facebook. That leaves them with Renren.
Renren itself is a cautionary tale regarding social media IPOs. Despite the combination of social media and the Chinese growth story under one umbrella, the stock has plunged more than 65% in one year as a public company. On Monday, the company said its first-quarter revenue climbed 56% to $32.1 million and the ensuing pop in the stock has taken Renren a few hundred million dollars north of small-cap territory.
Technicalities aside, the Facebook IPO could validate Renren if successful or lead to more downside pressure for the Chinese firm its American counterpart struggles out of the gate.
Bitzio (OTC: BTZO) Chances are you haven't heard of Bitzio, a micro-cap firm engaged in the mobile applications business. The company recently announced they have surpassed 40 million app downloads and launched the beta version of its app promotion exchange, "App Wall." While Bitzio is more mobile app than social media play, the company could prove to be an alluring takeover target for a larger social media firm such as Facebook.
Figure it this way, Facebook was willing to pay $1 billion for Instagram, basically a mobile app firm, valuing each Instagram user at $25. If Bitzio is successful in reaching its goal of 100 million users and monetizing them to tune of $10 each, the company could command a rich takeover premium.
Geeknet (NASDAQ: GKNT) The company known as "the online network for the global geek community" is a social media-type gathering place for technology professionals and enthusiasts and if Geeknet is to be considered a social media play, it's one of the oldest having been in business since 1993. Geeknet's first-quarter revenue improved to $22.3 million compared to $19.9 million a year earlier while its net loss narrowed to 33 cents a share from 38 cents.
The company is exploring alternatives for its online media operations, the sales of which could bolster the balance sheet of this micro-cap firm. Since that announcement, the stock has soared over 14%.
IZEA (OTC: IZEA) Florida-based IZEA is a provider provides social media sponsorships, which is to say the firm helps advertisers monetize their social media presence. Two things about IZEA: It's obviously intimately levered to the success of the social media industrial and with a market cap south of $16 million, it's clearly a speculative play the industry's upside. But that upside comes at less than 40 cents a share and that's with a 22% pop on Tuesday.
GSV Capital (NASDAQ: GSVC) There has been plenty of talk about which funds are best for accessing the Facebook IPO and while much of that conversation has involved ETFs, GSV Capital must not be ignored.
GSVC, which has been public for about a year, has risen to acclaim for its narrow focus on up-and-coming, glamor industries such as cloud computing, mobile computing and, of course, social media. The company holds stakes in n Kno, an e-textbook start-up and Twitter, among other others and previously invested in Zynga (Nasdaq: ZNGA) and Groupon (Nasdaq: GRPN). More importantly, GSVC holds a stake in Facebook.
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