FTD Stock Question

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CHR

CHR

Design matters
Nov 28, 2002
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Could someone more familiar with the games companies/brokerage houses play please explain to me why FTD's stock was trading at above $20/share only a week or so ago but was priced at $17.50 in the new offering?

Since the IPO price was at around $13, LG, the FTD execs/board and long-term holders could make a minimum $4.50 per share (36% ROI for holding 2 years). With their options, the profit would/could be much greater.

Why would the offering price come in so much lower than the prevailing price?

Does the offering hurt the small investor for the benefit of LG?

Is the dividend the carrot?

Is FTD hoping the UK Mother's Day increase (since Interflora wasn't on the books last year) this quarter will cover up for the V Day mess?

Enquiring minds want to know....
 
Quoting the article...

"The price is a 2 percent discount to Tuesday's closing price of $17.90."

Based on the supply/demand equiibrium point, increasing the supply of shares available to the public by 6 million shares has the effect of shifting the supply curve to the right...intersecting the demand curve at a new equilibrium point at a lower price level.

ECON 101...almost 30 years later!!!
 
CHR said:
Could someone more familiar with the games companies/brokerage houses play please explain to me why FTD's stock was trading at above $20/share only a week or so ago but was priced at $17.50 in the new offering?

Since the IPO price was at around $13, LG, the FTD execs/board and long-term holders could make a minimum $4.50 per share (36% ROI for holding 2 years). With their options, the profit would/could be much greater.

Why would the offering price come in so much lower than the prevailing price?

Does the offering hurt the small investor for the benefit of LG?

Is the dividend the carrot?

Is FTD hoping the UK Mother's Day increase (since Interflora wasn't on the books last year) this quarter will cover up for the V Day mess?

Enquiring minds want to know....
Click to expand...


Cathy,

I put your questions to my husband, a retired stock broker. Here's his reply. Hopefully it makes sense.. none of this stuff makes any sense whatsoever to me. I must have been born without the "stocks and bonds" brain cell. LOL

I don't follow this stock, but I see that it came public back in January 2005, and began trading around $14 share. I am not familiar with the offering you are referring to.....but if it was recent, it was a "secondary offering", not an IPO.

Generally, "secondaries" are for the original investors [the guys who put up the money to start the company] to take some cash off the table. It is generally not good for small investors. Whenever shares are issued, it dilutes the value of the existing shares. If the company is worth $100, and there are 100 shares outstanding, each share has a "book value" of $1. If 50 more shares are issued, each share now has a book value of .67 cents. The company is still only worth $100....but there are now more shareholders......so each one owns a smaller percentage of the total value.

The stock was trading above $20, but the key word is "was". Since the large drop in the market a couple of weeks ago, it closed yesterday at $17.77.

There are several ways for a brokerage firm to sign on to issue a secondary offering. In some cases, they basically buy the shares and re-sell them to the public. Whatever they can't sell, they own. Under those circumstances they are pretty careful about where they price the issue.
 
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Bigted said:
Beth, good answer. The only thing I could add is that the dividend was put in to make the stock a little more attractive, and hopefully nudge the price up a tiny bit more.
Click to expand...


I take no credit for the answer, but thanks.

Beth :~)
 
Insider Trading and Stock Options... FTD

Interesting spread sheet regarding INSIDER TRADING and STOCK OPTIONS, including many who have never worked a day at FTD can be found HERE from the SEC.
 
Wow. Those stock options were priced at $3/share. So Soenen exercised his options for 379,500 shares @$3 and then sold them @$17.50 for a net gain of about $5.5M on March 13.

Meanwhile, the price per share has fallen from about $20.50 on Feb 20 to $16.50 as of yesterday.

Beth, tell your husband thanks for the answer. That's what I thought. It looks like the brokerage houses bought the shares to resell on the market.
 
CHR said:
Wow. Those stock options were priced at $3/share. So Soenen exercised his options for 379,500 shares @$3 and then sold them @$17.50 for a net gain of about $5.5M on March 13.

Meanwhile, the price per share has fallen from about $20.50 on Feb 20 to $16.50 as of yesterday.

Beth, tell your husband thanks for the answer. That's what I thought. It looks like the brokerage houses bought the shares to resell on the market.
Click to expand...



I will pass it along, Cathy.

Beth :~)
 
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