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tv   Closing Bell With Maria Bartiromo  CNBC  May 17, 2012 4:00pm-5:00pm EDT

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signaling this rush to safety in the market. which we'll talk about coming up here as we head into the second hour of "the closing bell." [ closing bell ] it's a special edition of "the closing bell." the facebook frenzy. it's the epic ipo everyone is talking about. how can you cash in on the biggest public debut in recent memory? will the offering be a game changer? or the next big tech bust? we've got all the angles covered as the countdown to facebook's ipo begins. right now. >> welcome to "closing bell." you've got the numbers. >> apparently they have priced the ipo of facebook at $38 per chair. let's go to kayla tausche who has been following the story all
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along from the beginning. and i guess we got a price now. that was quick. >> we do have a price, bill. we've been reporting this all day. apparently just crystallizing at $38 per chair for that facebook price. now we reported that investors were being floated the idea of $39 a share. but take a look at what the markets have been doing. in the month of may, which is when they have been marketing this deal to investors, the nasdaq 100, down sharply, down 7 2/3. the s&p tech index down 8%. that was a benchmark for this deal. and that's why you're seeing at the high end of the range, but not over that range. >> let's go to kate kelly. it hits the top of the range, kate, but it didn't hit the whisper number, which was above that. >> that's right. i think there were conversations with investors about a dollar above, maybe even $2 above. 38 has been consistently the number that the underwriters, the company have been talking about with their large account holders. and apparently there was pricing call at 3:45 to a hash this out.
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there is very broad consensus at $38. the final i's have to be dotted but, this is highly unlikely to move. and we should expect to see this landmark deal at 38. >> all right. stand by, ladies. we'll be coming back to you as the news warrants. i'm sorry? all right. let's price out this with fusion analytics josh brown. he says do not chase facebook on this first day tom bellis has money, his and bob pisani is joining us as well. at $38, josh, how do you view the valuation on facebook here? >> i think it's about what we expected, and i think the stock opens up at a premium even from there. and i think it will be probably a positive for the markets overall tomorrow, because this is a really dreary atmosphere. but something like a facebook could really make people feel a little bit better about wading back into some nasdaq names. that's probably what we had
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expected. and i bet it opens up at a decent pop from there. >> but you still wouldn't buy it at these prices? >> if you're in on the ipo price, you're in a great position. i don't know that it makes sense to buy this stock at 50, $55. you might want to hang tight. >> tom, you've got money in the game here. you've got some facebook shares, 38 bucks a share. what do you think? >> you have millions out there who have been waiting for this day to come. people who couldn't buy facebook that are going to come into the stock and buy it wherever it opens up. if you look at it from a long-term perspective, look at google. everyone thought it was overvalued at 90. it went to 700 in three years. i think we'll see something slayer with facebook. >> we have a record number of insiders holding a large percentage of the stock. >> and they're selling it too. >> and they're going to sell it, partly because of tax law changes that are coming up at the end of the year. does that change the dynamic of how this deal will proceed? >> you know what? i think not. why? because it always comes down to the supply and demand of
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economics there is a lot of people out there that have been waiting to buy the stock that have cash on the sidelines there is going to be an even exchange of people selling and people coming into the market and buying. overall, this is an amazing opportunity for people to buy this stock. >> guys, one thing to keep in mind, though, this is going to be 400 some odd million shares. that's going to double within 180 days to over a billion shares out there. if you look at the example of linkedin, i think the message is you're going to have time. you do not have to own on day one. if you want to be in, allow for that process to take place there are three separate lock-up. 90 days, 150 days and 180 day. cool out i think is the key word. >> all right. stand by there, gentlemen. bob, i haven't forgotten about you. i want to bring in julia boorstin at this point. >> yeah, i'm here outside of facebook headquarters. i know there is going to be a big celebration tonight. the company is hosting an event for its 2500 employees here, a hack-a-thon. everyone is going to be talking about the stock price. everyone is going to be spending the night here, working on their
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different projects, engineering and coding their different projects. and tomorrow morning waiting for mark zuckerberg to ring the opening bell. the upper in the range, but not beating the range. everyone has been wondering where the stock is going to place. no matter what, it's going to make a lot of people in here a lot of money. >> bob pisani, you wonder what this will do to the market's mood tomorrow, especially when with close down 155 points on the dow tonight. the nasdaq down 2% on the day. can the market be placed on facebook's shoulders tomorrow and go higher? >> no. i don't think that the market is going to turn around on facebook. it's got a lot bigger concerns. i'm happy about facebook. it's got people talking. it's got people excited. and i hope it does well for everyone, because i want people to do well in the markets. that's what we want here. but i'm a little more concerned what is going on overall in the stock market. and we simply dropped dramatically in the last half hour. there has been no buying at the 11:30 close after europe for a week now there has been no buying in the last hour. we simply keep drifting lower.
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and today we finally had a day where the volume really picked up in the last hour. we haven't seen these in some of these declines in the last week. sue? >> let's bring back in kayla tausche. she has been doing more reporting on this. >> i think broad consensus like kate said is really key here. the pricing call started at 3:45. sometimes you can see the calls wind on for hours and see the price not come out until later in the evening because there is so much disagreement over the price here. i think that's a good sign that not only the investors who are selling out, but also the company felt comfortable with that range, and they got enough of a signal from investors that that was a price that they felt very good about their models. >> they've had a tremendous growth curve the last eight years. >> they have. >> that they have been in existence. and the valuation i think reflects that growth curve at this point, don't you think? >> i do. >> how do they grow it beyond this point? >> let's not forget, there has been a total of approximately $10.1 billion invested into the company, right. now they're going to have an
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additional $13 billion invested from the ipo. so with what mark zuckerberg has done with this company up to this point, another 12 to $13 billion in his war chest, i think the valuation will supersede anything else, and the value of the stock will justify. >> so much of their business model is based on advertising revenue. >> it is. >> in a recent poll that cnbc did with the associated press, a majority of the polls said they don't click on the advertisements. so does the advertising revenue model still maintain them and continue their growth as bill suggested? >> i think it does. but we cannot forget that this company is going to create so much commerce that it's yet to be known that the valuation may look cheap in three or four years. >> really? >> because the price goes lower? [ laughter ] >> touche. >> you already feel the price is expensive at this point. can they grow into their valuation, do you think? >> i think at the early stages,
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it's not going to trade based on any kind of valuation. it's going trade based on sentiment and excite. and that's fine, and nobody should be shocked. what ends up happening, though, is when you start getting into earnings modeling, you start lacking at multiples to cash flow. i don't know how you get past $3 a share in the first three years. when you get there, it's tough to say that this going to command that much of a higher multiple than let's say an apple or a google already does right now. it's not a bad stock. it's not a bad company. but i think it's really important to understand that we're already pricing in some amazing expectations. >> is it fair, josh, to do that on a multiple to cash flow? >> no. >> is earnings that irrelevant? it's 100 times earnings probably tomorrow. >> once again, tomorrow nobody cares about earnings. tomorrow it's all about oh my god, facebook is here. and that's cool. i have no problem with that but that's tomorrow. >> nobody cares about earnings. we know where that came from. gentlemen, stand by. we're going to keep you around as we continue to follow this story. and again, if you just joined us we have a price on the ipo for
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facebook, $38 share. >> bill and i are back in just a moment. >> we're just getting started on this special ipo edition of "the closing bell." it hasn't even traded yet, but is facebook already overvalued? up next, one top tech analyst explains why he wouldn't buy the ipo with his own money, much less yours. he is facebook easco founder, ceo, and he own ss a majority of the voting class shares. that a good thing for shareholders? do you think facebook will live up to its sky-high valuation? tweets your answers @cnbcclosingbell. your responses later in the show. for a hot dog cart. my mother said, "well, maybe we ought to buy this hot dog cart and set it up someplace." so my parents went to bank of america. they met with the branch manager and they said, "look, we've got this little hot dog cart, and it's on a really good corner. let's see if we can buy the property." and the branch manager said, "all right,
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you're watching a special edition of "the closing bell," the facebook ipo. now back to bill and sue at the new york stock exchange. >> and if you're just joining us, facebook has priced its
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initial public offering at $38 a share. it will now be the largest ever internet ipo. we have a full cast of characters here to comment on this. we want to start, though, with carly fiorina, the former chair and ceo at hewlett-packard and now cnbc contributor. also with and rejoined by josh brown and tom bellis. you have been there. you ran a silicon valley behemoth in hewlett-packard. what is mark zuckerberg going through right now? what do you make of the ipo as it gets ready to trade tomorrow? >> well, and i think back to my experience when i helped lead then the biggest ipo in u.s. history, lucent technologies from at&t. and what is going on right now in mark's life is an incredible amount of excitement frenetic activity, and a huge set of expectations. so i think you've been talking about what is the fundamental question about facebook. can it possibly live up to the
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very high expectations. i would argue in the short-term probably not, but on the other hand, i don't think he should be focused on the short-term. and in the long-term, probably so. and so i think the key now is for mark and his board to remain focused on their long-term vision to be as transparent as possible about how they mark progress towards achievement of their goals, and to give shareholders regular updates on how are they doing on monetizing all of that advertising potential. and how is their strategy going on mobile apps. >> what is the biggest change that occurs when you flick the switch and you're a publicly traded company? he has been running a company for eight years, starting with his dorm room in harvard. now he is the biggest internet ipo of all time. what will be the biggest change that he faces now? >> now he literally has millions of people looking over his shoulder and secondguessing every move he makes. and that's going to be a big
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transition. and it's why the board will be so important to give him the support that he needs to ignore some of those onlookers when they're not being particularly productive. >> do you think he is up to it? how do you think he'll fare on that? it is a complete change of his life in many different ways. how do you think he'll fare? >> oh, i think he'll fare all right, for two reasons. first, look what he has done so far. it really is -- this is historic not just because it's the largest internet ipo ever, but think about what facebook has done literally to change our world and to change so many people's lives. >> right. >> what he has already accomplished is unprecedented. and i think and hope that he will have a board around him that will give him the support that he needs. >> more conversation to come here, folks. please stand by. let's get back kayla tausche. she is on top of the story, following it minute by minute for us. kayla? >> bill, i want to talk about what went into the pricing tonight. if you take a look at the nasdaq composite, obviously this is the exchange where facebook is going the trade. really, the tech benchmark that
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we're looking at here. closing the day down 2%. it's a bad day for the vix. bad day for the overall market. and if you see something like this happening throughout the day, even if you have canvassed investors at $1 above the range, you really don't want to overextend yourselves. and that's why they pulled back to $38. investors seeing the market weakness today and saying you know what? i might buy at $39, but i won't feel great about it. so i wanted to show you guys this chart because this played a big role in today's pricing. >> yes indeed. david garrity, what do you think? $38, hit the high end of the range. didn't go above it, as some opined that it might do. what did you make of the valuation on facebook right now? >> the valuation means they have a lot of fronts on which they have to execute positively, mainly the transition over to mobile formats, being able to monetize that and some people think they'll never get into china. clearly there is a lot that has to be done. but as carly said, nothing succeeds like success until you start running into obstacles. and i think things that happened
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earlier this week like gm making a very noisy exit. >> what did you make of that? the timing of that announcement too, by the way. >> i thought it was very interesting, both from the timing. but i think it's also significant from the standpoint of saying can advertisers actually go and spend money on facebook to actually realize commerce. you can build all the brand awareness you want, but if you actually can't transact or motive consumers to spend money, you have to question the value of the medium over time. >> tom holds facebook. he is bullish for the long-term and the short-term on the stock. would you buy it, david? >> only on a pullback. >> okay. >> how significant a pullback? >> 25% pullback. >> 25% pullback. take that, tom! >> carly, what did you think of the gm announcement and the timing that they would be pulling their ads from facebook? >> well, believe it or not, my guess is the timing might have been inadvertent. i know that sounds crazy. but i can imagine general motors as a big, big corporation. i can imagine someone in market organize pr sort of putting this out routinely, and not honestly
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thinking it through. my guess is this didn't go all the way to the ceo or the board. so it could have been one of those unfortunate coincidences. frankly, from both general motors and facebook's point of view. because what i think that announcement did was start a whole conversation about, well, why is ford different? why does ford feel good about its advertising? the truth is this could say as much about general motors as it does about facebook's advertising. >> i got one more question for you, carly. but first let's go to julia boorstin, outside facebook's headquarters with more on this development on general motors, right? >> yeah. i would say that the timing was probably inadvertent. we have to remember we're in up-front sales ad week. this is the time of the year when big marketers like gm figure out where they're going to be allocating their money. the $10 million that they were spending on actual facebook ads was a quarter of the total amount they were spending on content for facebook. a lot of folks i talked to in the advertising industry said to spend $30 million on other facebook related content was not
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the right way to spend money on facebook ads. and ford made a point of saying that facebook advertising works if you do it right. sort of a little bit of a dig at gm there. the other thing i would point out about facebook ads is facebook is just touching the tip of the iceberg in terms of the fortune 500 and fortune 100 advertisers. many of its advertisers are smaller and midsized businesses. what they really need to do to grow their businesses is target more of the major, major advertisers like gm and ford. >> i don't know. call me cynical, but who didn't know that this was the week that facebook was coming public and make that announcement? carly fiorina, before we go to this break, there was movement earlier this week, a group calling for facebook to add their woman to the board before the ipo. what do you make? you know the ins and outs and the works of silicon valley. they have an all male, all white board at this point. do you suspect that sheryl sandberg will want to migrate this board i a more equal men to women kind of a board? or what do you make of this
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right now? >> well, what i think is a board is incredibly important. i frankly think we should focus as much of our attention on how a board is doing as how a ceo is doing, because as we've seen, unfortunately, also out of silicon valley recently, boards can do a lot of damage. i think the most important thing on a board is to have diverse representation. and by diverse i mean not just women, men, but people who come from big companies as well as small companies. the facebook board has, of course, predictably been a lot of investors up to this point in time. i would expect that over time they will diversify their board across a number of dimensions. >> being that you were the head of hp for quite a while, the 8 to 10% layoffs that may be coming at this company works do you make over it? what is your reaction to it? is it the appropriate move for meg whitman to make? >> as i understand it, right now it's speculation. the company hasn't commented on it. i guess i would say --
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>> our david faber has confirmed that is going to happen, carly. and the feeling is they want to real locate assets to the areas where they feel there is more growth opportunities for the company that have been starved to this point. do you agree? >> well, i certainly think there are areas in the company that have been starved. and those include r&d and marketing. 8 to 10% is a very large number. and so i guess i would have to see a little bit more detail about where that is coming from. but it just strikes me as a big number. and obviously, however, a bold and serious move. >> something that was needed i guess on the part of meg whitman at this point. >> well, look, i personally think that hp has majored on cost cutting for way too long. they've majored on cost cutting for the last five or six years. and i think that's why you see so much underinvestment in r&d and new product development and marketing. on the other hand, i don't know where the people are right now. and so it may be necessary for those magnitude of cuts in order to find the money to reinvest.
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>> very good. thank you. i don't know who is staying or leaving, but i hope you're all staying. we have more to come here for those who cannot get enough of this facebook ipo. we have your solution coming up here. you can check out our cnbc facebook page where you can get up to the minute information about the most anticipated ipo since google. go to a lot of individual investors clamoring for a piece of facebook's hot ipo. but we ask the question, would they be serving as stooges by serving as insiders cashing out with the instant profits? a reality check as we continue. >> i wondered where you were going with that. >> i wasn't sure. what do some of the oldest u.s. companies think about the facebook hoopla? we have the head of the new york
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stock exchange and ups's chairman. stay tuned for that coming up. ncer ]e a what if you had thermal night-vision goggles, like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. and i thought "i can't do this, it's just too hard." then there was a moment. when i decided to find a way to keep going. go for olympic gold and go to college too. [ male announcer ] every day we help students earn their bachelor's or master's degree for tomorrow's careers. this is your moment. let nothing stand in your way. devry university, proud to support the education
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if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this. welcome back to "closing bell." i'm kayla tausche. a little bit more on facebook. just getting word from the nasdaq that facebook shares will be cleared for trading at 11:00 a.m. there was some speculation about that window between 10:40 and 11:00 a.m. tomorrow. nasdaq releasing a statement saying it will be letsche a.m.
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remember, that mark zuckerberg and his team at facebook will be ringing the bell remotely at 9:30 a.m. eastern, 6:30 a.m. pacific time from the menlo park headquarters. we'll have carl quintanilla there live. bill? >> all right, kayla, thank you. meantime, with all the hype and buzz, do you think facebook can live up to its high valuation? we asked you and you responded. here is one from bill ciaraco. no way is facebook worth 30 to 40 times next year's earnings when apple trades at ten times this year's earnings. chris johnston also cast a doubt. he told us anyone who buys after the open will lose money. it will be lower in six months and one year. and the negotiation activity deputy stop there. mark harker wrote facebook is a fad that will burn out soon. we thank you for those responses, and we continue to ask you to tweet them at cnbc's closing bell. bring tom bellis in here who is a shareholder. you're twitching here as you hear some of that. what do you think of that as you
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get ready to own shares in the biggest internet ipo tomorrow? >> listen, we're very excited. thing is just the tip of the icebe iceberg. it's been a way of life. almost a billion people that can identify themselves all across the world. with 13 or $14 billion in additional cash in their war chest, he has created a $100 billion company. i think over the next three or four years, this could be probably one of the biggest technology companies in the market. >> okay. you've obviously put your money where your mouth is. >> that's true. >> some of facebook's biggest investors are cashing out, though. while ordinary investors are trying to get a piece of this extra hot ipo. some of those selling as much as half their stakes. goldman sachs, tiger global, and facebook director peter thiel. so are average investors going to get a bad deal on this? >> i think that's the question. i think we'll find out whether it's the insiders who are going to build up big fortune.
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rory meara of capstone investments and jeff cox as well. and our other guest is with us as well. what do you make of the deal at this point? and what are your longer term prospects for the company? >> we believe at the current valuation that we're talking about, $38 a share we do believe is overvalued at these levels. $5 billion at the high end. we do think it's overvalued. we do think the company can grow into a broader valuation over time. we think it's overvalued right now. we are concerned about two things. first of all, growing a lot outside of north america, but most of their revenue comes from north america and western europe. >> okay. >> more and more users are going mobile and they're having trouble monetizing mobile. >> what would be a better price for you? >> our target valuation is 75 to $85 billion. >> rory, what do you think? >> i would agree. some of the recent trends we've been seeing makes me think a fair valuation is about $38. i think the stock will do well
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tomorrow. those who start getting into it after it's trading are getting into a fairly expensive stock. >> okay. jeff cox, this change means more than half of the offer willing come from current shareholders. i mean 57%. if memory serves, that's double what it was for google, for example. are we making too much of that at this point? >> well, i think the big thing you have to look at here, bill, and what i'm focused on the most is how does this affect the overall market. now, and then i think that will in turn determine how it's going to affect facebook. this is what the market has been waiting for. i wrote over a month ago that we were going to see sell in may. and the firewall in front of sell in may was going to be facebook. this is what the market needs right now. it needs that momentum, push. and i think that's what facebook is going to do more than anything for this market. are the average people who go into tomorrow and try to trade this, try to buy this off the open, are they going to get a bad value? that's very possible. but i think this is a momentum-driven market. and this is going to provide an important boost of momentum to
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the stock market. >> all right. gentlemen, thank you. some of you are staying. some of you are not. but we appreciate your insights on what has been a very newsy story right here. what advice to a pair of seasoned executives have for facebook's co-founder mark seducter? the top brass from the new york stock exchange right here, and ups, a 100-year-old company, range the closing bell today. they weigh in on that, coming up after the break. and a bit later on "closing bell," is a facebook really a bet on mr. zuckerberg. if you think of it that way, do you want to take that bet? you're watching cnbc. we are first in business worldwide. across the united sta. the only time i've ever had a break is when i was on maternity leave. i have retired from doing this one thing that i loved. now, i'm going to be able to have the time to explore something different. it's like another chapter.
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all right. >> welcome back. we're call caught up in the facebook hoopla here. was but we have to get some other news in here. moody's downgraded 16 spanish banks on a day that it was confirmed that spain did slip into a recession in the first quarter this year. so that will be something that will probably set the tone for the markets tomorrow. >> that's right. but there are several stocks that are moving in after-hours trading. some is to the upside. brian schactman joins us with the market flash on what is happening.
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brian? >> sue, facebook is so hot, it makes cloud computing seem old and not so sexy, right? it's pretty sexy if they're gains. let's take a look at, the ceo will be on "mad money" with jim cramer. they had solid numbers across the board here. i looked at just about every metric, including guidance they beat and beat soundly. the stock is up 5%. on the flipside, not a cloud name, but a tech make, autodesk. their revenue guidance were really weak here. the numbers themselves weren't bad, the stock down 6 3/4. >> facebook pricing moments ago with $38 a share. this on the same day that the stock exchange euro next launches its century club and affiliated index. it's made up of u.s. companies with more than 100 years of success. >> so what advice can the captains of the biggest companies give to the new kid on the block? let's ask two ceos who join us for an exclusive interview.
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duncan niederauer and scott davis of ups. gentlemen, a pleasure. >> nice to be here. >> happy anniversary to the exchange. >> thank you. >> tell us about the century index, what that's all about. >> so we had this idea when we were thinking about how to celebrate our 220th anniversary. >> which is today, by the way. happy anniversary. >> quite fortuitous and serendipitous that it happens to be the same day that facebook is pricing which hopefully will be the next great generation. but all the companies that have traded in the public markets and were founded more than 100 years ago. we found there were about 300 of them. and we set about creating an index of 100 of them using regular index construction techniques. and you would find that's a who's who of american business, and it's an index in markets, good, bad or indifferent has outperformed the broader market for a while. >> scott, i found it interesting looking back at the history of your company. 1907, two young entrepreneurs who came together to start a small package moving company here. it sounds kind of familiar,
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doesn't it? >> it does. we actually started off delivering parcels from department stores to people's houses. and it's kind of funny now as you get to 100 years later, we're delivering a lot of goods to people's houses but only this time it's internet and online shopping driving that. it's kind of a full circle. >> what advice would you give to mark zuckerberg, who is now the head of basically tomorrow will be the head of a publicly traded corporation? life is going to be quite different for him i would think. >> life will be different. but i think he's got to be willing to change the company as things change. and his business will change very quickly. we just got together with 22 company, 22 ceos. and the light quality was cultures do not fear change. at ups we use two words to describe our culture. it's constructive dissatisfaction. we'll celebrate accomplishments, but we're never happy. how can we do it better. what can we do next time. >> there is the movement that young is better, that it's hipper and so forth. but your index is a reminder that even if you're a 100-year-old company, you can
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still be cutting edge today. >> and in fact if we showed you the list, and i'm happy to drop off a copy. >> i think i've got one right here. >> if you look at the list, it is companies that, as scott said, they wouldn't be around if they hadn't embraced change, embraced innovation, reinvented markets, innovated new products, and none of the companies that we just spent the last couple of hours with are doing what they were doing when they were founded, obviously. >> here is a couple of examples. we've got abbott labs, aetna, tiffany, target, pmg. i was struck by the diversity. >> it's very diverse. >> in your index. and for the average investor, who may be risk averse in a market like this, where you see a whipsaw down 155 points on the day, i would think that this might be an index that would appeal to them. >> it's a pretty steady group. and we're not pretending that a lot of money is going to track it or it's going to be the s&p 500. we just thought it was a nice moment to celebrate companies that have had longevity.
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and as bill said, you don't have to be young to be cool. these companies were all founded more than 100 years ago, and you've got honeywell. you've got ibm. you've got png, coke, pepsi, these are companies that have been great companies and will be great companies. that's really what we're try dog celebrate. that's all. >> last question, i'll make him flinch for a second. it has to be bittersweet to watch the hoopla over facebook, a company i don't cotted. >> we wish them the best, period. we've been in touch with them this week saying good luck tomorrow. i think it's really important for the markets that this goes well tomorrow. do we wish they were part of our community? sure. but as someone who tries to be an advocate for all publicly traded companies, they're on our team as far as i'm concerned. we'll look out for them. >> duncan, you're a good sport to answer that question. david, always good to see you. thank you for stopping by. >> our pleasure. thanks. >> happy anniversary. technology obvious the future. here is facebook's mark zuckerberg from his cnbc interview last september with his thoughts on the power of tech.
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>> i just think that the key is to do whatever we can to make sure that this part of the economy that is working really well can grow even faster. because i think it's the engine for the future. >> mr. zuckerberg will be the wealthiest 28-year-old on the planet tomorrow. >> how nice for him. >> yeah, we're happy for him. but is the facebook ipo putting too much power in the hands of just one person? we'll talk about that when we come back. you're watching cnbc, first in business worldwide.
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♪ you're watching a special addition of "the closing bell," the facebook ipo. now back to bill and sue at the new york stock exchange. >> so let's see. we got world's largest social network, check. largest internet ipo ever, check. second youngest self-made billionaire, check. youngest ceo of a fortune one thousand company to go public, yes. check. the list could go on and on for mark zuckerberg's resume, leading many to ask does he have too much power as ceo of facebook. >> so when facebook does go public tomorrow, as a 28-year-old, mr. zuckerberg becomes the leader of a company
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estimated at a $104 billion. still with us is john bellis, and josh brown from fusion analytics. also joining the conversation is steve weinstein from itg investment research. tom, i'll start with you. too much for him to handle or not? >> not at all. i think one main reason why the company is where it's at is because of mark zuckerberg. if you look at steve jobs or bill gates, they built huge companies they were in control. they were the visionaries. they were the commanders in chief of their vision. and that's why the companies got to that point. >> and josh, i know you agree. but it's one thing to run a company out of your dorm at harvard with a handful of other students and programmers. it's another thing to run a $100 billion company with millions of shareholders looking over your shoulder, don't you think? >> of course, but let's be realistic. who else do you want? do you want a baby boomer? do you want to bring in carol bartz or steve ballmer? >> even the google guys had to bring in a manager to run the company.
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>> and it didn't go very well. >> it went pretty well for a while. >> they ended up having to come back and retake the reins. i think anyone that wants anyone but zuckerberg here would be crazy. look, this guy has done almost nothing wrong. >> are you saying eric schmidt didn't do a good job at google? >> eric schmidt did a fine job, but at the end of the day, the founders had to come back and take the reins. same thing with apple. they try to bring in professional management, and then they need jobs back. i think you want zuckerberg here. i think the valuation is a vote of yes on the fact that this is the guy. >> steve, what do you think? >> i think certainly in thor in-term, it's a positive to have him there. i think when you look at a tech or really dynamic industries, a founder-led company is going to do better, because really only the founder can push the vision. it really only feels confident to make the real bold decisions such as going out and spending a billion on instagram. professional managers don't make those sorts of decisions. they tend to just try to manage
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away the risk versus making the big steps. so i think for the near term, mark zuckerberg is definitely the guy to be running the company. >> tom we have 30 seconds. >> look at the success so far. >> okay, tom we have 30 seconds. what as a holder of the stock, what do you want to see from mr. zuckerberg? what do you want to see in terms of a board? >> you know, i think the board -- one great thing about mark, he has identified a great team, and he has brought that team on board to help him get to where he is. i think he should continue the path, not reinvent the wheel, use the money to benefit shareholders. i think that's what he is going to do. >> all right, gentlemen, thank you. that's a topic that i'm sure we'll be discussing as the weeks and months come along here. >> as we continue on this special edition of "closing bell," lawmakers want to keep americans who leaf the country with their money and not mon th citizenship out of the u.s. case in point is facebook co-founder eduardo saverin. >> what can congress do to keep them here paying their fair share of taxes? that's a thorny issue we'll tackle next on the close.
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you're watching a special addition of "the closing bell," the facebook ipo. now back to bill and sue at the
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new york stock exchange. >> we want to focus on one co-founder, facebook co-founder eduardo saverin. he stands to make about 3 to $4 billion when this company goes public tomorrow. his capital gains tax bill would come to about $67 million. but he won't have to pay a penny of it because he renounced his u.s. citizenship last summer before the ipo was announced. he became a citizen of singapore, where coincidentally or not, there are no capital gains taxes there. saverin says he did not do it to avoid paying taxes, but instead plans to do more business in asia. now senators charles schumer of new york, bob casey of pennsylvania have introduced legislation barring any american renouncing their citizenship for tax avoidance reasons from reentering our country, and they would tax their future investments at a 38% rate. >> joining us is a man who recently interviewed mr. saverin for "the new york times," quinton hard different. he joins us now.
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quinton, he says he didn't do it to avoid taxes. what was your take on that? >> i think first we ought to spend a minute in the weeds. but they're really, really nice weeds, susan. the guy did pay taxes. in 2006, we passed a law country called an exit tax where if you're going to renounce your citizenship, they lock at all your assets, and you pay a fee on that. his capital gains were there. in those days facebook was valued at about $50 billion. whatever he's got, it was valued at half that. he paid a capital gains or borrowed to pick capital gains on that. what we're talking about here really is he's not going to pay this week. >> right. >> and the gap between that. you said 67, i'd be surprised if it wasn't somewhere north of 100 million in savings. it's a lot. >> my question, is as well-intentioned as schumer and casey are with this bill to try to go after people who renounce their citizenship to avoid taxes, how do you prove that? how do you prove that that's the reason, you know?
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eduardo savron said he moved to singapore because that's where he's doing business right now. how do you prove that they are leaving for tax reasons? >> of course you're sitting down across the table from an rrs agent, and those guys do have a bias to just saying i don't buy that. what have you got? >> right. >> you know, and he can say those kinds of things but i talked to schumer's office and they said they would hope for behavior like i paid more taxes in a foreign country than i would have in the united states. therefore, it's not a hardship thing. you know, it's not a hardship why i left. i'm really paying more taxes. i just didn't want to be in the u.s. look, we passed this law in '06 precisely to keep rich people from paying nothing when they left. the guy has been within the laws. he did this. we don't like this huge gap, this huge savings he did, and schumer is trying to back up and change the law again. i'm a little wary of laws written because of the behavior of one person.
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>> right, right. >> that was my question. how many people would this affect, do you think, or does it affect? >> well, the way -- >> do we have a gauge? >> well, the way they want to cam at this, it would be people with over $2 million or with income over $147,000. that's really quite a lot of people. there were 1,700 people last year who renounced their citizenship. >> good to see you. i'll let you get back to that other story you're covering on facebook there, the ipo coming out tomorrow. >> yes, indeed. >> pleasure. >> sela mae and go away indeed. the dow headed for its worst month of may in two years. >> and more on the facebook ipo when bill and i come back.
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okay. the calm before the ipo storm talk. let's bring jewkayla tausch and julia boorstin in. kayla first. >> 38 is a good pry. given where we are in the market and given the fact that the nasdaq was down 2% and given the fact that there was some demand at 39, just not in today's conditions, means there could be a little bit of room for upside tomorrow as people expect. >> julia? >> bill, i think where the stock moves tomorrow and where the
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stocks moves over the rest of the this year will really hinge on where investors see the company growing. we did see growth slow in the first quarter from last year. the company is bigger and not growing at pace that it used to. the question is where does it go next? investors will count on facebook to grow its mobile revenue and mobile profits and to diversify its businesses. i think there's going to be a lot of anticipation in facebook perhaps, building out an advertising networks so the big question tomorrow is where the stock moves is all about the company's future mobile get and diversification and advertising. >> ladies, i got ahold of this memo that mark zuckerberg sent to his employees ahead of the ipo as part of the filing. he outlined five core values for the employees of facebook. focus on impact. if you want to have the biggest impact, the best way to do it is to make sure we always focus on solving the most important problems. most fast, enables us to move fast and be bold, taking risks. be open. we believe a more open world is a better world because people
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with more information can make better decisions and build social value. once again, facebook exists to make the world more open and connected, not just to build a company. >> quite a list. >> and you wonder if he'd be able to maintain those five core values, kayla, after he's got 1 million shareholders looking over his shoulder. >> on the day they filed the s-1 on february 1st his post on facebook was a picture of his desk with his mac computer, a gatorade and a poster that says "stay focused and keep shipping." i think that really sent a message, not only to facebook employees but also potential investors and all of them, hundreds of thousands of people subscribing to his news feed and that, of course, will be the theme for that hack-a-thon, focusing on what the company does best and what they are all about. >> is that an affectation, julia? is that an affectation, the hoodie, the gatorade, all of this, or is this really mark zuckerberg, and is he the kind of guy that can run a company like this? >> i think it really is. every time i've interviewed him,
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he's really been interested in talking about the product. this is a guy who is in the weeds, who is really involved in the products that facebook creates, all the services that he's creating to make the website, make the apps more interesting and more compelling and useful for users. the fact that facebook is celebrating the big ipo with a hack-a-thon meaning it's a bunch of engineers coding and trying to create new products for facebook shows us where his heart is. >> thank you, both. great job both of you have done in covering this ipo. >> they are not done yet. >> special coverage tomorrow as well when it does get under way and trading on the nasdaq. >> you know, i wonder about the pressure on mr. zuckerberg because a lot of people have been saying on cnbc this is so great for the market. this will bring back the individual investor. this is something that the individual investor can believe in. that is a very tall order. >> and for me the most telling thing is that number, that 57% of the shares offered to the
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public. >> right. >> are coming from insiders who are carrick out. that's double what it was for google when they came public back in the day. i mean, sure, you're going to want to -- there may be tax reasons because of the way the tax treatment is going to change by the end of this year, but i think it's also very telling about the prospects of the future of this company and the point of view of those insiders who help this company become public. before we go, let's recap the day on wall street. must not forget that we've got a selloff under way on wall street. the major averages closing at session lows, the worst level in four months. the dow down 156 points, 1.25% and the s&p down five points, just above the 1300 level there, down 20 points. the nasdaq got hit the hardest, down 2% today at 2813, a four-month low there as well. it's been a tough market for this, and we should point out that the ten-year yield, the ten-year note. >> all-time low. >> at an all-time low. talk about a safe haven play as they rush to


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