Are we seeing institutions paving the way to get shares for the May launch of Facebook?
You have to wonder when you see strong demand for all of the deals this week that mutual funds are thinking, "OK, I will play in all of the deals you have going, including deals like Cafepress -- hardly a tech company -- if I have a chance to get Facebook down the road."
Frankly, I don't blame these institutions. If you put in for a Demandware (DWRE) or an Exact Target (ET) or today's Millennial Media (MM) and you hold on to it, you are earning your ticket for Facebook. The fact that mutual funds are most certainly NOT flipping deals, to me at least, represents a concerted effort to show that these funds appear as holders and investors and that they will do the same thing for Facebook.
This spadework for the Big Kahuna is a time-honored strategy that I think will work. I am sure that the bookrunners of Facebook want this deal placed well and who is most likely going to hold on to it other than someone who held on to Allison Transmission (ALSN) or Rexnord, two non-hot deals that give these investors a leg up on others.
One of the side benefits of this whole process is that the deals themselves perform much better than you would expect because the flippers are absent. That makes it imperative for anyone who can to try to get into this spate of deals, especially because many aren't thought to be that hot going in. Take Annie's (BNNY). The chatter simply wasn't that hot ahead of this organic snack maker. So, stock was available for retail and for mutual funds. The fact that Cafepress is a cyclical company with uneven growth selling what amounts to personal tchotchkies tells me that Facebook is most certainly game on.
Or another way to look at it: you flip, you're out.
Otherwise, I wouldn't have even expected a pop on this one. None whatsoever.