
Facebook closes at $38.23 first day NASDAQ trading, above IPO price $38.00 - liuwei6
http://www.marketwatch.com/story/facebook-starts-at-40-in-debut-then-fizzles-2012-05-18?dist=afterbell
======
loumf
On the one hand, this indicates that the underwriters did a good job of
maximizing FB private shareholder value on the IPO.

On the other, the shape of the daily curve looks like it was supported at that
level artificially.

Even if not, it doesn't look like there's a lot of market confidence for it at
this level.

~~~
gojomo
More evidence of artificial support, a tweet and screen capture from Paul
Kedrosky:

<http://lockerz.com/s/209964861>

It's easy to overlook the graphic; it's the thin black bar with faint text. It
shows:

    
    
      Bid (size): 38.00 (x9999900)     Ask (size): 38.01 (x146300)
    

...and the tweet referencing it was about 20mins before the close. The earlier
tweet was:

 _@pkedrosky: Watching certain underwriters try to keep certain IPOs above
their issue price reminds me of playing Missile Commander, at scale._

Still, this isn't necessarily a negative for Facebook. They optimized their
take, and Zuckerberg won't be needing the market's approval or capital again
for a while.

~~~
asmithmd1
Why isn't this illegal stock price manipulation?

~~~
stryker
It's the only manipulative practice allowed by the SEC because of the need to
"maintain a fair and orderly market". This article describes it fairly well in
its abstract: <http://economics.ouls.ox.ac.uk/10713/1/IPOstabilization.pdf>.

"Stabilization is the bidding for and purchase of securities by an underwriter
immediately after an offering for the purpose of preventing or retarding a
fall in price. Stabilization is price manipulation, but regulators allow it
within strict limits - notably that stabilization may not occur above the
offer price. For legislators and market authorities, a false market is a price
worth paying for an orderly market."

EDIT: Just included the full description.

------
cletus
I'm glad about this.

If we had trading that quickly doubled or tripled the market cap then that may
well be evidence of unsustainably high valuations (I hesitate to use the word
"bubble" [1] as it's largely a baseless pejorative at this point).

That being said, some say this is evidence of FB being fairly priced. I
disagree on two points:

1\. Pre-IPO investors expect an immediate return. Investment banks ("IBs")
underwriting IPOs will be selling those shares to their most valued clients
(in large part). Those clients expect an immediate return. Also there is a
nontrivial number of "stag" investors in IPOs (investors who do first-day
sales to trade on this bump);

2\. The IPO itself can in large part in set the tone. A stock that jumps 50%
on IPO sets expectations as a stock that's going places. A stock that drops
can have everyone for the hills and a stock that's level can just make
everyone nervous (becoming a prisoner's dilemma);

3\. There's evidence the IBs are propping up the stock at issue price levels;
and

4\. Current investors will have a lock-out period from selling. This may be 6
or 12 months. Whatever the case, if supply meets demand now then extra supply
suggests a price drop may be coming when that lock-out period ends.

Consider this: Even _Groupon_ jumped 25% on first-day trading.

Now I'm not predicting doom and gloom here. In all honesty I have no idea what
will happen with the stock. I do consider it a high-risk investment at this
point and personally I wouldn't touch it. YMMV. It may still be spectacularly
well. OTOH it could be the Beijing Olympics of the tech sector (the Beijing
Olympics being essentially the turning point of the economy in 2008).

Trading at a P/E of ~100:1 is high risk. Make no mistake. Facebook has
important strategic issues they need to deal with.

Anyway, to those early employees, congratulations. This will change the life
for many (and already has). I'm particularly glad to see that Zuck didn't pull
a Pincus [2]. This speaks highly of him IMHO.

[1]: <http://news.ycombinator.com/item?id=3987892>

[2]:
[http://online.wsj.com/article/SB1000142405297020462190457701...](http://online.wsj.com/article/SB10001424052970204621904577018373223480802.html)

~~~
zmj
Layperson question: what does it matter? What impact does Facebook's valuation
have on its day-to-day business, now that they have the IPO cash in hand?

~~~
JamesPeterson
The shareholders control the board, and the board controls management. Thus,
unhappy shareholders will mean new management.

In FB's case however, Zuck still controls (through proxy) the majority of
votes; Zuck cannot be ousted.

There are other problems with a non-performing stock too; employee morale may
be (and is increasingly?) tightly related to the share options they own. If
management is not performing well and costing their employees money (!) that
can ruin morale.

This doesn't just involve Facebook; currently the market is pretty bullish on
web companies. It can quickly turn bearish, restricting the capital that
currently flows so free.

~~~
jrockway
Do Facebook employees get options, or do they get actual stock?

~~~
JamesPeterson
Typically, they'll be offered options to buy stock for essentially nothing.
Often there will be tricks though - for example it might take a couple of
years in employment to be able to exercise all of the options.

------
kjemperud
So what about the cancel/change orders being stuck in limbo the entire day? I
was unable sell $fb because of this. Tried to dump them at 41.50, but because
one cannot "trade with oneself" I couldn't. Heads should be rolling at Nasdaq
by now...

~~~
shangrila
This is why you do not play the IPO game unless you are an insider
(underwriter or early investor of the company in question). You _will_ lose.
They will see to it. And you will have no recourse, as they are in bed with
the regulators.

------
EternalFury
They got a lot of capital to play with. What they do with it will determine if
they can build a business that is worthy of such a high valuation.

They are currently priced as if they were bound to run a highly profitable
business. Now, reality must catch up with the dream and promises.

------
jlft
It started trading at $43.00 and ended at $38.23 which is a -8.39% loss. Why
is the IPO price $38.00 if it started trading at $43.00?

~~~
zred
Facebook's IPO was yesterday (while it started active trading today). If you
were one of the blessed investors, you could buy the shares yesterday at $38.
It seems like there were a lot of orders early today (probably entered in
before Facebook started trading) that were executed early and by the time 3pm
rolled around the pent-up demand had subsided.

So, this morning when it started trading, the first order seems to have been
$42.05 (according to Google) with subsequent orders fluctuating from there.
The LA Times is reporting ([http://www.latimes.com/business/technology/la-fi-
tn-facebook...](http://www.latimes.com/business/technology/la-fi-tn-facebook-
trading-20120518,0,6622700.story)) that the companies who underwrote the IPO
(for example, Morgan Stanley) had to defend the price so that it didn't drop
below $38 during trading today. Basically, one can do this by offering to buy
shares at $38. That way, their clients who bought yesterday at $38 don't
suffer a loss today as the stock is actively traded.

------
felipemnoa
Stupid question: How much money did Facebook (the company) actually raise? A
lot of shares where sold but not all of that money goes to Facebook. It goes
to whomever was selling those shares.

~~~
debacle
We saw ~125% volume today, meaning that 125% of the shares that were for sale
were sold (some were obviously sold twice.

I would assume this means that all of the stock was sold, meaning, with a
valuation of ~104 at close, Facebook raised ~16 billion.

------
mtkd
Wait until the engineers leave to become VCs.

------
faramarz
I read earlier that the underwriters were forced to buy large amounts to keep
the price above the IPO. It could have been much lower!

~~~
fusiongyro
Wait until next week. It'll happen.

------
waterlesscloud
So how does this ripple out?

My (amateur) thought is that it means the end of billion dollar valuations for
companies with no revenue whatsoever.

Which will have the effect of pushing all valuations down.

Which is maybe not a bad thing, overall.

Will it mean less actual funds raised? Or similar amounts, just at notably
lower valuations (and thus for a greater percentage of shares)?

------
chintan
FB: $38.00, May 18th 4:19 ET

<http://i.imgur.com/QP12D.png>

------
gamble
Traditionally, the point of an IPO was that it let the company raise more
money than private investors could provide, so that the company could fund
further growth. It's hard for me to see what opportunities this IPO opens for
Facebook. They were already extremely well-funded. They already saturate their
niche. It seems like the most likely consequence is that it will lead to early
employees cashing out and moving on, while the only possible use for the
billions raised are the kind of acquisitions that history shows rarely result
in a net gain for the acquirer.

~~~
encoderer
But the reason they had so many billions cash on hand was the huge round they
rased last year via Goldman Sachs.

Investors certainly participated in that with the expectation that they could
exit with profit in the near future.

In other words, they took a payday advance (with very generous terms to the
borrower). You still need the payday.

------
craze3
_"The stock closed Friday at $38.23 — just 23 cents above its IPO price"_

Just wanted to point out that FB did NOT close at $38.02, though I think that
would've been hilarious.

------
typicalrunt
The after-hours charts are interesting. The stock price is bouncing around the
$38.23 range (+/- $0.03), but even marketwatch.com is showing some jumps up to
the $40 range.

~~~
btbuilder
after hours trading is not a great thing to try to trend with because the
volume is so low.

------
btbuilder
Apart from the 'blessed' investors who purchased before the stock started
trading on Nasdaq, everyone who bought FB lost money today.

------
nirajd
NASDAQ glitched all day.. Scottrade, Fidelity, and other brokerages were
unable to place orders.

------
rorrr
I really don't get why FB is valued that much. If you look at their revenues,
net income, quarter-to-quarter growth, the stock should be at $5.50.

Seriously, look at GOOG, compare it to FB. You must be insane to buy FB.

~~~
dsil
Buying stock is generally about what you think will happen in the future, not
what has happened in the past.

~~~
rmATinnovafy
No, sir.

Speculating is about what you think will happen.

Buying stocks in a business is about buying into something that has shown to
be profitable, and stable. Enough to exchange your hard-earned money for it.

Read "The Intelligent Investor" by Benjamin Graham to gain a better picture of
what investing really is.

~~~
crazygringo
Speculating is not about what you think will happen. It's about what you think
_other_ people think will happen. It's about the market, not the inherent
value of the stock.

Good investing is about buying into something you think is undervalued.

If a business has been "shown" to be profitable and stable, as you say, then
its stock price will be high enough to reflect that, and it's probably not
undervalued, unless you know something special about it. All you can expect it
to receive a steady small stream of dividends, or sell the stock sometime in
the future for roughly the same amount you paid for it originally. That's not
really "investing", that's just swapping cash for stocks. Save yourself some
risk and just put your money in an index fund instead.

------
its_so_on
(EDIT: Earlier this title read "barely above it's IPO price". It definitely
used this word, "barely". My comment is now moot. I'm leaving it due to the
replies.)

what is with this title? It sounds like it's saying sullenly, "a year later,
Facebook is barely above its IPO price".

OF COURSE IT'S TRADING AROUND ITS IPO PRICE, GIVEN THAT IT'S JUST IPO'D. I
mean, of ALL the times a company could be trading at its IPO price, don't you
think the IPO date is the least notable? Yeesh.

 _Incidentally, the submitter and I also have a VERY different definition of
'barely.' $0.23 in a day means $230 per 1000 days. At that rate, investing at
$38 sounds like a steal to me! A better title might be "Facebook stock up
already_!"

~~~
sukuriant
The more interesting thing is: "It didn't plummet like some people were
expecting!!!"

~~~
mratzloff
Wait until employees start dumping their stock.

~~~
fennecfoxen
The flip side of that sentiment is "wait until a bunch of sector-specific ETFs
and other mutual funds start buying their stock". You know, QQQ Trust, S&P500
index funds, et cetera.

