My take on it, its a non-IPO IPO, this is my reasoning.
Facebook has been trading for a while on secondmarket (a secondary market for 'qualified' investors). The prices have been pretty stable there. These people evaluate the markets in much the same way that every other trader does, and so their value calculation is going to be in line with what any 'real' trader might come up with.
Retail investors, the folks who made the dot com bubble so spectacular, have largely left the market as a mover. So any 'creative' valuations are probably not going to drive a lot of trades.
So trading on the NASDAQ opens up the process to retail investors but they aren't a significant factor, that leaves the more experienced investors and they have already valued the company and shown that on second market, so that the stock moves at all is probably more along the lines of the daily/monthly variations you might see in a Google or Apple or Groupon, rather than the sudden IPO pop of people who wanted to own the stock but were unable to get their hands on it.
That makes it a 'good' sign in the sense that the folks who valued the company in the secondary market were making pretty good guesses on the value. It is also another 'non-bubble' sign in the sense of over-exuberant participation by the retail investors.
This is simply a transfer of wealth between Wall Street and Facebook's major shareholders. (not a broad base at all)
It was made possible because Wall Street believed every Facebook user would try to get in on the action in the open market.
It turns out retail investors and Facebook users didn't join the anticipated mania and now, the valuation of the company is what Wall Street made it out to be and not much more.
In other words, from here on, Facebook's valuation and Wall Street's ROI will solely depend on Facebook's financial success. Obviously, for Wall Street, this is much slower and much more work than having a stock take off on the basis of a mania.
If the financials don't turn up in the next few quarters, watch out.
People are also totally ignoring the reality of the market as a whole today.
In the literal sense of "today", Facebook launched on kind of a crappy day. In the more expansive sense of "today", nobody's terribly optimistic right now. The US still hasn't pulled itself out of the hole, and current events in Greece and France have everybody wondering what happens next in what is collectively the world's largest economy.
Even without the unique features of Facebook's IPO, this isn't a great time to be looking for "pop" in anything.
Markets care a lot about sentiment. A nice 10-15% pop on the first day leaves everyone feeling pretty good - and a nice halo around the company.
If the price levels off.. Well people will be inclined to be more critical. They'll be wanting FB to start moving the stock north sooner.
I was a bit curious about the pricing. As you say, they want the maximum investment value, but there is some sense in buying the management team some time. A billion less may have saved them a lot of headaches dealing with market criticism, given them time to get some wins...
Anyway. It's a brave new world when you suddenly have to start answering to shareholders.
While Zuckerberg has a complete majority, in what ways do they have to answer to shareholders? Fear of stock price drops as people sell off? Reporting requirements?
Good question! One I've been trying to wrap my head around for a while. This level of control at this stage/size is unprecedented (if somebody has some good analogs I'd be interested to hear...).
There are all sorts of responsibilities and duties for an exec (of a public company in particular) - but I'd assume the FB board is insured to the hilt.
Ultimately execs always answer to shareholders (i.e. they bring a return). Otherwise the market doesn't work - the market they've used to raise 16 billion... How this will manifest for FB now and in the future, I've got no idea.
One thing happy shareholders does give you is access to future capital. However, can't see that being a problem for a while yet.
People who know better can answer this more authoritatively. My two cents are:
1. Stocks are never priced "appropriately" in the US. Companies rarely adopt the Google-style book-building process (kinda like an auction).
2. FB like others was placed privately. What incentive does an investor at the roadshow have to buy it before the markets open? The incentive is the probability (nay near-certaintly) of an opening day "pop".
3. It's common for underwriters to have a 180-day lock in periods for employees who want to sell their newly-public stock (Linkedin had it iirc). This is another way to increase demand for the shares sold during the roadshow.
And yet, big companies and time can change the rules. Google used the Dutch auction. Facebook has long been traded on non-public markets. Facebook also demanded lower fees from underwriters, and less first-day-pop 'money left on the table' for initial-distribution purchasers.
A negligible 'pop' could mean FB's strategy worked beautifully, capturing the maximum amount of capital for their own goals. It doesn't send the same signal as when another company, which needed more help from the underwriters and media, has a stable first-day price.
If you mean that the have succeeded in issuing a stock at 100x earnings, you are absolutely right. This is not, by any measure, a failure for those who funded FB prior to the IPO. In fact, they are getting paid 100x earnings for the company they own!
Its price seems to have been corrected to $7.80 which is down 5% on the day but not as bad as before. I wonder if someone just keyed in an order wrong?
My guess is FB bottomed out and is now trending steadily up, so "panic mode" has subsided somewhat. Also, perhaps some big players saw Zynga at near $7 being quite a value so they swooped in.
