GK Men

Companies ask: Does advertising on Facebook pay?

Thu, 17 May 2012 20:01:11 +0000

By PETER SVENSSON and TOM KRISHER

NEW YORK – Responding to extraordinary demand, Facebook said Wednesday that it would sell more stock in the company’s initial public offering. But ahead of the IPO, a debate emerged between two of the nation’s largest automakers: Does it pay to advertise on the social network?

General Motors, the nation’s largest automaker, said it would abandon Facebook ads after concluding they were ineffective. At the same time, Ford reaffirmed its commitment to Facebook, saying their relationship was stronger than ever.

The direct financial impact of GM’s move is minimal for Facebook, but the decision drew attention to the network’s advertising system, which some observers regard as immature.

In a regulatory filing Wednesday, Facebook said it would add 84 million shares, worth up to $3.2 billion, to the IPO, which is shaping up to be the decade’s hottest. The company’s stock is expected to begin trading Friday on the Nasdaq Stock Market under the ticker symbol “FB”.

Almost half of the additional shares come from investment firms DST Global and Tiger Global. Goldman Sachs is doubling the number of shares it is selling. Facebook board members Peter Thiel and James Breyer are also selling more shares.

Since all of the additional shares come from insiders and early investors, the company won’t benefit from their sale.

“It certainly does raise the question: How much higher could the stock go if institutions who know the company well think this is a good price to sell?” said Daniel Ernst, an analyst with Hudson Square Research.

On the other hand, he said, investment firms only make money by selling their stakes, and they have bills to pay. So the fact that they are selling more is only a limited indication of their confidence in the company.

The news comes a day after Facebook raised the expected price of the stock to a range of $34 to $38 per share, up from its previous range of $28 to $35.

At the high end of the price range, the IPO would raise $16 billion, without the overallotment option reserved to meet extra demand. That would make it the third-largest IPO in American history, ahead of General Motors in 2010, according to Renaissance Capital.

The IPO would value Facebook at more than $100 billion. The stock is expected to get a final price Thursday evening.

Facebook loses a big advertiser, buys a small company’s employees

Wed, 16 May 2012 20:01:27 +0000

By Jeremy C. Owens, San Jose Mercury News, Calif.

May 16–As it prepares for its highly anticipated IPO, Facebook continued with the business of being the world’s largest social network Tuesday, dealing with the loss of a large advertiser even as it “acqhired” a small London company.

And it appears demand for that IPO is growing. CNBC reported late Tuesday that the company plans to increase the size of the IPO by 85 million shares, or 25 percent, meaning it could raise up to $18.5 billion.

General Motors, reportedly the third-largest advertiser in the United States, is halting its paid Facebook advertising, the company confirmed.

“We regularly review our overall media spend and make adjustments as needed. This happens as a regular course of business and it’s not unusual for us to move our spending around various media outlets — especially with the growth of multiple social and digital media outlets,” a GM spokesman said Tuesday in an email statement.

A report from The Wall Street Journal said that GM was pulling out of the paid Facebook ad market because the company found its ads on the Menlo Park company’s social network to be ineffective. The Journal, which reported that GM spent $10 million a year on paid Facebook advertising, cited unnamed sources for its information.

Analysts say GM is not the only company doubting Facebook’s ability to woo consumers with paid ads.

“Companies in industries from consumer electronics

to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget — a shocking fact given the site’s dominance among users,” Forrester analyst Nate Elliott wrote in a Monday blog post, according to the Journal.

Bad news on the advertising front reflects poorly on Facebook just days before an initial public offering expected to reap billions for the company and value it at up to $104 billion. Advertising is Facebook’s main revenue stream, and it has already admitted that it is not yet able to convert its mobile app’s growing popularity into more advertising dollars.

An acquisition announced Tuesday could help Facebook in its mobile attempts, however — the company agreed to acquire the team behind a London-based mobile firm called Lightbox.

Facebook investors to cash out more shares

Wed, 16 May 2012 20:01:23 +0000

By PETER SVENSSON

NEW YORK – Insiders and early Facebook investors are taking advantage of increasing investor demand and selling more of their stock in the company’s initial public offering, the company said Wednesday.

Facebook said in a regulatory filing that 84 million shares, worth up to $3.2 billion, are being added to what’s shaping up to be the decade’s hottest IPO.

Facebook’s stock is expected to begin trading on the Nasdaq Stock Market on Friday under the ticker symbol “FB”.

The entire increase comes from insiders and early investors, so the company won’t benefit from the additional sales.

The biggest increases come from investment firms DST Global and Tiger Global. Goldman Sachs is doubling the number of shares it is selling. Facebook board members Peter Thiel and James Breyer are also selling more shares.

Founder Mark Zuckerberg isn’t increasing the number of shares he’s selling.

The news comes a day after Facebook raised the expected price of the stock to a range of $34 to $38 per share, up from its previous range of $28 to $35.

At the high end of the price range, the IPO would raise $16 billion without the overallotment option reserved to meet extra demand. That would make it the third-largest U.S. IPO in history, ahead of General Motors in 2010, according to Renaissance Capital.

The IPO is the most anticipated in years and would value Facebook overall at more than $100 billion.

The offering is expected to get a final price Thursday evening.

In a filing with the Securities and Exchange Commission, Facebook said current shareholders are now offering approximately 241 million shares, up from about 157 million shares previously.

Even though Zuckerberg isn’t increasing the number of shares he is selling, the additional sales will trim his voting control to 55.8 percent from 57.3 percent. That’s because he has voting control over some shares now owned by investment firms, which will be sold in the offering.

The run-up to Facebook’s IPO occurs as companies debate the effectiveness of Facebook as an advertising platform. That examination sharpened Tuesday, when General Motors Co., the nation’s largest automaker, said it would stop advertising on Facebook.

Ally’s U.S. auto lending operations not for sale, CEO says

Wed, 16 May 2012 20:00:54 +0000

By Brent Snavely and Nathan Bomey, Detroit Free Press

May 16–Ally Financial’s U.S. auto lending operations are “absolutely not” for sale, the company’s CEO, Michael Carpenter, said Tuesday.

Carpenter said the decision to place its mortgage arm, Residential Capital, into Chapter 11 bankruptcy, is designed to eliminate a business that has been a drag on Ally for years and improve Ally’s ability to repay U.S. taxpayers for loans received during the recession.

“We believe that combination of these actions is a very, very strong result for Ally and makes the prospects for the company substantially brighter,” Carpenter told analysts Tuesday.

ResCap filed for Chapter 11 bankruptcy protection Monday in a New York court.

Ally agreed to pay $750 million to help fund the bankruptcy obligations of ResCap and revealed it would bid $1.6 billion for certain ResCap mortgage assets. It also has put its international operations up for sale.

The company expects to remove more than a quarter of its assets from its balance sheet through the bankruptcy of subsidiary ResCap and the sale of its international assets.

Ally plans to shed about $34 billion in international operations and $15.7 billion in ResCap assets.

Without ResCap and international lending operations on its books, Ally would have about $136.6 billion in assets.

But analysts questioned whether the remaining business will have the financial strength necessary to compete.

“From a credit point of view, this is going to be as strong of a company as there is in the banking business,” Carpenter said. “I don’t think there is a better credit environment than auto loans in the U.S.”

General Motors CEO Dan Akerson said Monday that it is interested in acquiring Ally’s international operations, according to Bloomberg News.

GM declined to comment Tuesday on Ally’s U.S. lending business.

Ally was owned by GM and was known as General Motors Acceptance Corp.

It was sold in 2006 to private equity giant Cerberus Capital Management.

The company said the bankruptcy and the sale of international operations would allow it in 2012 to pay back one-third of the $11.7 billion it owes to the U.S. government.

The Treasury Department — which provided $17.2 billion in emergency loans to Ally, then GMAC, in late 2008 and 2009 — has recovered about $5.5 billion so far.

While Ally’s auto lending division has thrived, its mortgage arm has struggled.

Contact: Nathan Bomey at 313-223-4743 or nbomey@freepress.com.

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UPI NewsTrack Business

Tue, 15 May 2012 20:01:38 +0000

Markets close on downside NEW YORK, May 14 (UPI) — U.S. stock indexes followed European markets lower Monday, with investors reacting to recent elections in Greece, France and Germany.

By close of trading in New York, the Dow Jones industrial average lost 125.25 points or 0.98 percent to 12,695.35.

The Nasdaq composite index gave up 31.24 points or 1.06 percent to 2,902.58.

The Standard & Poor’s 500 index lost 15.04 points or 1.11 percent to 1,338.35.

On the New York Stock Exchange, 481 stocks advanced and 2,608 declined on a volume of 3.4 billion shares traded.

The benchmark 10-year treasury note gained 19/32 to yield 1.781 percent.

The euro fell to $1.2836 from Friday’s $1.2917. Against the yen, the dollar fell to 79.86 yen from 79.94 yen.

In Tokyo, the Nikkei 225 index added 0.23 percent, 20.53, to 8,973.84.

In London, the FTSE 100 index lost 1.97 percent, 110 points, to 5,465.52.

Election results have undermined years of work turning much of Europe toward financial discipline as the primary focus of economic strategies.

With several countries already suffering from prolonged recessions, voters are turning out advocates of austerity budgets in favor of politicians who pledge to put job creation in front of debt reduction.

But the debt crisis still looms large. Late last week, Spain ordered its banks to raise $39 billion to cushion themselves against further losses.

Ina Drew retires from JPMorgan WASHINGTON, May 14 (UPI) — U.S. bank JPMorgan Chase said Chief Investment Officer Ina Drew is retiring in the wake of trading bets that lost at least $2 billion.

The bank said Drew, one of the most successful women on Wall Street, was retiring after 30 years with the firm. She would be replaced by Matt Zames, co-head of Global Fixed Income in the Investment Bank and head of Capital Markets.

Daniel Pinto, currently co-head of Global Fixed Income will operate that division solo, the bank said.

In Washington, White House press secretary Jay Carney said President Barack Obama was among those who thought the losses at the bank, which occurred over a 15-day trading period, validated the call for tougher bank regulations.

“As you know, the president fought very hard against Republicans and Wall Street lobbyists to get Wall Street reform passed,” Carney said.

McClendon: Chesapeake will raise needed money

Tue, 15 May 2012 20:01:33 +0000

By Adam Wilmoth, The Oklahoman, Oklahoma City

May 14–Chesapeake Energy Corp. will have the cash it needs to fund its current drilling budget and complete its transition to oil production by 2014, CEO Aubrey McClendon said in a conference call Monday morning.

McClendon clarified a series of announcements late Friday that startled investors and caused the company’s stock price to lose more than $1 billion in value in about 45 minutes.

Chesapeake filed its first quarter report Friday, a day after it had been due. That evening, the company announced it had agreed to a $3 billion unsecured loan.

“The Goldman and Jefferies term loan will provide us with greatly enhanced financial flexibility,” McClendon said Monday.

McClendon also said the company has had strong interest in its planned asset sales and has had to cut off the number of buyers interested in Chesapeake’s Permian Basin holdings in the “double digits.”

“We expect those transactions to close in the third quarter, and we will use the proceeds from those transactions to pay off the Goldman and Jefferies loan,” McClendon said. “We also plan to sell sufficient noncore assets in 2013 to make sure we are well-funded next year as we complete our natural gas-to-liquids transition and reach our goal of being cash-flow positive in 2014.”

Chesapeake has chosen to delay or cancel its planned volumetric production payment for the Eagle Ford shale, instead opting to go with the $3 billion loan.

“We decided this unsecured $3 billion term loan, which will provide a long runway into 2012 and allows us to complete our asset monetization from a position of strength was the right way to go,” McClendon said. “That’s what we’ve done. We’ve applied the proceeds to our (revolving credit facility). We have a lot of room. We have a lot of things planned for June. We have things planed in the third quarter. We’ll just play it on out.”

McClendon and Chief Financial Officer Nick Dell’Osso spent much of the 67-minute call detailing the strengths of the embattled company.

McClendon pointed out that even without the assets the company is trying to sell, Chesapeake owns “assets easily identifiable as being worth at least $50 billion to $60 billion” even though the company’s enterprise value is now about half that.

Get up to speed on digital world

Mon, 14 May 2012 20:01:50 +0000

By Joyce Lobeck, The Sun, Yuma, Ariz.

May 13–Most businesses today likely have a website and Facebook account, but may not be getting the maximum value from their digital presence. Nor do they know where to turn for help in improving their online “store.”

That’s what the Desert Southwest Marketing and Social Networking Expo is all about. It will provide opportunities for learning and networking that promote career growth and business success. It also will encourage the exchange of ideas and best practices by presenting marketing case studies and the latest innovations of industry leaders.

The expo will be held from 9 a.m. to 4 p.m. Wednesday at the Quechan Casino Resort.

The goal is to help small and medium businesses effectively promote themselves in the digital world of social media and interactive advertising, said Roger Lopez, marketing director for Marine Corps Air Station Yuma and one of the organizers of the inaugural event.

But the expo isn’t limited to e-commerce, he said, noting that not only business people but nonprofit organizations and government entities will also benefit from the training and networking it will provide.

“We want to help them realize more value from their digital presence,” he said.

At the same time, Lopez said, many small businesses don’t know where to go for help.

Therefore, he said, the expo also provides an opportunity to showcase local talent that is savvy about working the Web and social media.

“They’ll be able to interface with resources. And 80 percent of them are local. They’ll be able to build relationships.”

Lopez said he has been working with Arizona Western College Small Business Development Center and the Yuma Sun’s interactive marketing department to train businesses. But he wanted a larger and more effective outreach vehicle.

“We decided we needed to do it right and do it big,” he said.

“As leaders in Yuma’s social media and interactive community, we felt that this is a perfect opportunity for us to sponsor the Digital Media Expo,” said Lisa Reilly, advertising director for the Yuma Sun, a major sponsor of the event. “It brings an opportunity for businesses to learn about interactive solutions that are available locally that will help them grow their businesses.”

Details help NJ malls survive weak economy

Mon, 14 May 2012 20:01:46 +0000

By Ken Serrano, Asbury Park Press, N.J.

May 14–Despite an economic downturn that crippled homeowners and sapped the economy of millions of jobs, there are signs that regional malls in central New Jersey and farther north have held their own.

In many malls, more lavish seating, hotel lobby-like comforts, aesthetic lighting and other upgrades have helped.

When business sinks, those details can lend an edge.

“They’re incredibly important,” said Carol Kaufman-Scarborough, associate dean of the School of Business at Rutgers University’s Camden campus and a retail marketing expert. “It’s a signal to customers that they’re welcome.”

Those upgrades have proven even more crucial in the current economy, Kaufman-Scarborough said, because high gasoline prices and high unemployment are making consumers pickier and more apt to stay closer to home.

Companies that own regional malls do not share numbers on sales or trafficking. But from 2007 to 2011, retail sales at shopping centers in New Jersey have actually risen from $75.6 billion to $78.1 billion, according to CoStar Realty Information and the International Council of Shopping Centers. Those sales came when the unemployment rate rose from 4.3 percent in 2007 to as high as 9.4 percent in 2011. Jobs at those centers during the same period fell from 388,000 to 368,500.

Shopping centers include everything from super regional malls to factory outlets and strip malls.

Figures on mall vacancies, however, are readily available. Vacancies have risen in central New Jersey from 2.7 percent to 4 percent from the first quarter of 2011 to the first quarter of 2012, according to Reis Inc., a real estate research firm. But that still places them at a low level.

Nationally, although vacancy rates at regional malls stands at 9.2 percent, that’s after two consecutive quarterly declines. That national drop in vacancies was driven by the dearth of new space, according to Ryan Severino, senior economist with Reis.

In the past six years, just one new regional mall has opened in the United States, but that happened in the first quarter of this year, he said.

According to CoStar, the picture appears brighter for most of the malls in Central New Jersey. Several are fully occupied.

Residential Capital seeks Chapter 11 protection

Mon, 14 May 2012 20:00:41 +0000

By TOM KRISHER

DETROIT – The U.S. government is hoping that Monday’s bankruptcy filing by Ally Financial Inc.’s troubled mortgage business will help the company repay its government bailout faster.

Residential Capital LLC, or ResCap, filed for Chapter 11 bankruptcy protection in New York, unable to make payments on debt taken out to finance soured home mortgages. The filing will separate the money-losing ResCap subsidiary from Ally’s auto loan and banking businesses, allowing the latter businesses to grow and speed up repayment of Ally’s bailout from 2008 and 2009, Ally said in a statement.

Ally also said Monday that it is exploring the possible sale of its international operations, a move that also should help strengthen its finances and make payments to the government. International businesses include auto loan, insurance and banking operations in Canada, Mexico, Europe, England and South America.

Ally, which is 74 percent owned by the U.S. government, was the financial arm of General Motors Co. until the banking industry meltdown in 2008. It needed a $17.2 billion bailout to survive the downturn. Ally has repaid about $5.5 billion and it still owes the government just under $12 billion. The government is hoping to get the rest of the money back through a public stock offering by Ally, or perhaps the sale of its remaining businesses.

When the bankruptcy and potential sale of international operations are finished, Ally expects to repay two-thirds of its bailout, or about $11 billion. The additional payments could come by year’s end, the company said.

“We believe that this action puts taxpayers in a stronger position to continue recovering their investment in Ally Financial,” Assistant Treasury Secretary Timothy Massad said in a statement. ResCap is a separate company, and the government does not hold any debt or equity in it, the government said. The ResCap board decided to seek bankruptcy protection on Sunday.

Ally’s statement said that ResCap has reached agreements with its key creditors for a speedy bankruptcy. But Ally has to put up $150 million for bankruptcy financing and pay $750 million to ResCap to make the deal work. Ally also will make the first bid on up to $1.6 billion worth of troubled mortgages that will be auctioned. The agreements made before the filing have milestones for ResCap to come out of bankruptcy protection by the end of the year, Ally said.

Bankruptcy aims to free Ally of bad mortgage assets after auto rescue

Mon, 14 May 2012 20:00:39 +0000

By Nathan Bomey, Detroit Free Press

May 14–Ally Financial, which still owes the government about two-thirds of the $17.2 billion in emergency loans it received as part of the General Motors and Chrysler rescues, nudged its residential mortgage subsidiary into Chapter 11 bankruptcy today to shed toxic mortgage-related securities.

Residential Capital (ResCap) filed for bankruptcy protection following a meeting of ResCap’s board of directors Sunday.

A statement about the bankruptcy filing was released early Monday and can be found here.

“The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us,” said Ally Chief Executive Officer Michael A. Carpenter in the statement. “This action, along with pursuing alternatives for the international businesses, will allow Ally to focus 100 percent of its energies on further strengthening its already leading U.S. auto finance and direct banking franchises.”

Ally Financial was founded in 1919 as the General Motors Acceptance Corp. (GMAC), a provider of financing to automotive customers. Over the years, GMAC expanded into insurance, direct banking, mortgage operations and commercial finance. A 51% stake was spun off to Cerberus Capital Management in 2006. It changed its name to Ally in 2010.

Ally has 14,800 employees, including “well over a thousand” in metro Detroit, spokeswoman Gina Proia said. Most ResCap employees are in Pennsylvania, not at Ally’s headquarters at the Renaissance Center in Detroit, she said.

Taking ResCap into bankruptcy carries political implications because it is one part of the auto loans that didn’t turn out as planned. The U.S. government still owns 74% of Ally. Taxpayers have recovered only $5.5 billion of $17.2 billion provided to Ally through the Troubled Asset Relief Program (TARP) in 2009. Ally received more than twice the taxpayer assistance offered to Chrysler.

The bankruptcy, which does not include Ally’s core auto finance and online banking operations, is a painful step designed to free Ally’s profitable business from the burden of ResCap’s bad mortgage assets.

“It is clear to me this is part of a housecleaning exercise,” University of Michigan bankruptcy law professor John Pottow said. “They want to take Ally public soon, and they think (ResCap would) weigh down on it.”