Early Facebook mutual fund buyers likely made money

Mon May 21, 2012 2:59pm EDT

* Fidelity, T. Rowe Price funds bought on secondary market

* Fidelity paid $25 to $35 per share - analyst estimate

* Funds could be buying more shares on Monday

By Ross Kerber

May 21 (Reuters) - Fidelity Investments and other big mutual fund families that were early backers of Facebook Inc are likely still winners despite the social network's troubled stock market debut.

Facebook shares were initially priced at $38 per share on Thursday after the market closed. Despite an initial bump, they have since fallen and were trading around $34 a share on Monday afternoon. That led to much hand-wringing among technology investors who had expected a bigger boost for the widely-used service.

But don't cry for the mutual funds, said John Bonnanzio, editor of the Fidelity Insight investor newsletter. Many funds bought Facebook shares last year, while the company was still private, on secondary markets for considerably less than $38, he said.

For example, about 24 Fidelity large-cap stock funds bought over $200 million worth of Class B Facebook shares at between $25 to $35 from March to May of last year, Bonnanzio estimated. Class B shares have more voting rights than the Class A shares sold in Facebook's IPO, but convert into the same number of Class A shares when they are next transferred.

Along with Fidelity, T. Rowe Price Group of Baltimore and Morgan Stanley's asset management unit were also big buyers of Facebook shares before the company's long-awaited initial public offering, according to securities filings.

Most of the funds would still be above water despite Monday's decline, Bonnanzio said. That also assumes the funds were not tempted to buy more shares at $38 in the IPO deal.

Or, funds, could even be buying on Monday as the shares dipped. "If they are true believers, one would have to assume they are buying more" shares of Facebook today, Bonnanzio said.

Facebook makes up just a tiny portion of the portfolio of big mutual funds that bought last year. Fidelity's well-known Contrafund, for instance, has total assets of $84.2 billion according to Morningstar. The fund's most recent filing, dated March 30, shows holdings of $106.6 million in Facebook -- just 0.127 percent of the fund's total net assets at the time.

Fidelity spokeswoman Sophie Launay declined to comment.

T. Rowe Price held more than 18 million shares of Facebook as of March 31, according to a recent Facebook securities filing. Based on a share price of $35, T. Rowe's stake would be worth about $630 million.

T. Rowe Price spokeswoman Heather McDonold declined to comment.

Funds were able to buy the shares on secondary markets, such as SharePost or Secondmarket, which arranged for Facebook employees to sell their personal shares before public trading began.