Barclays sells largest note tied to Facebook

File picture: Toby Melville, Reuters

File picture: Toby Melville, Reuters

Published Apr 18, 2014

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New York - Barclays sold $37.9 million of structured notes tied to shares of Facebook, the largest such offering in the US.

The one-year securities, issued April 10, yield 10 percent annually and pay an additional 5.9 percent if the stock rises at least 10 percent at maturity, according to a prospectus filed with the US Securities and Exchange Commission.

The notes protect against 5 percent of losses, with 95 percent of capital at risk.

Mark Zuckerberg’s company is focusing on wireless device users, from increasing mobile-advertising sales to buying the messaging application WhatsApp and virtual-reality company Oculus VR.

That push has made the company more valuable, Aaron Kessler, a San Francisco-based analyst at Raymond James & Associates, said in a telephone interview.

“For the longer term, I wouldn’t be surprised if two- thirds-plus of advertising is mobile,” he said.

Ad sales for mobile devices such as phones and tablets surpassed those for desktop computers for the first time last year, according to Facebook’s most recent earnings report.

Raymond James affirmed a 12-month price target of $71 for the social network on April 15.

Facebook has fallen 18 percent to $59.65 as of 1:56 p.m. in New York from a record high of $72.59 on March 11.

Investors have bought $157.6 million of notes tied to the Menlo Park, California-based company this year in 81 offerings, according to data compiled by Bloomberg.

That’s up from one $12.9 million offering through the same period last year.

Facebook has completed or announced at least 40 acquisitions, including the $19 billion for WhatsApp in February and $2 billion for Oculus the next month, Bloomberg data show.

Vanessa Chan, a spokeswoman for Facebook, and Mark Lane of Barclays declined to comment on the securities.

Banks create structured notes by packaging debt with derivatives to offer customised bets to retail investors while earning fees and raising money.

Derivatives are contracts with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather. - Bloomberg News

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