When it came to Facebook Inc. (NASDAQ:FB), some European banks and investors placed some bets, and won big on Facebook’s stock slide. Turns out, some European investors made 500 percent on their investments in Facebook while Facebook stock fell 45 percent. Billionaire hedge fund manager and early Facebook investor Chase Coleman was on the losing end of this deal.
Ah, the joy of the put and call warrants!
Some research conducted by Bloomberg regarding puts and calls on Facebook Inc. (NASDAQ:FB) stock in Europe found that while several banks placed varying put and call warrants on Facebook’s stock price prior to the IPO, one such warrant in particular has paid off handsomely – and much earlier than expected. Bloomberg notes in its research that there was a put option out for Facebook stock to be $22 by March 2013 (remember, the stock’s IPO price was $38 a share). Those put warrants cost 7 cents (U.S.) to purchase just a week after the IPO. With the stock trading now below that $22 mark, those who cash in those put warrants will have received about 40 cents – a return of more than 500 percent on their money, Bloomberg reported.
There were other put warrants as low as $12, and some call warrants that had strike prices as high as $150, according to the Bloomberg piece.
Maybe those investors in the $22 put warrant didn’t make a bet – maybe they knew something. Henry Blodget of Business Insider, has been bearish on Facebook Inc. (NASDAQ:FB) and sees several issues that will keep the stock wallowing at 50-60 percent of its IPO value. He talks about these issues in an Australian article, laying out the particulars and his projection that Facebook is actually pretty accurately valued at this point.
It seems to Blodget that the fundamentals of Facebook Inc. (NASDAQ:FB) just weren’t consistent with the IPO price, and now that the price has fallen, he sees some other issues that may not break the company, but will continue to tamp down the stock price – perhaps most noteworthy is the company’s upcoming tax bill, which is estimated a $3 million, and the expiration of the “lock-down” period, after which time insiders will be permitted to sell their shares into the market. The more shares that enter the market, the more diluted the market becomes, the lower the share price will go. How many shares will enter the market remains to be seen, but its estimated that “hundreds of millions” of shares have been locked up by insiders.