Facebook closes at $38 on day one

Facebook closes at $38 on day one

Summary: Facebook was priced at $38. On day one, the stock saw a high of $ 45, a low of $38, and ultimately finished at $38.37. Why didn't it fall below the $38 mark, even though it tanked twice?

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Facebook on Thursday priced its shares at $38, giving itself a valuation of $104 billion, and raising $18.41 billion. Earlier today, Facebook went public at 9:30 AM EST and then started trading on the Nasdaq under the "FB" ticker at 11:00 AM EST. At 4:00 PM EST, Facebook was back at $38.37.

If you're wondering how this is possible, let me explain. The company's 33 underwriters bought up shares of the company during the Nasdaq debut to prop it up and keep it above the $38 offering price through most of the day. That's why even though it tanked right at the beginning, after debuting at $42.05 (a gain of nearly 11 percent, which I'm sure all the company's investors are quite please with), it never went below $38.

It's a fairly common practice during IPOs, especially high-profile ones. Facebook is no exception. The underwriters (read: banks) make sure to buy enough to counter the massive demand of selling. The goal is to prevent their customers (remember who they offer shares to) from suffering big losses.

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Topic: Social Enterprise

Emil Protalinski

About Emil Protalinski

Emil is a freelance journalist writing for CNET and ZDNet. Over the years,
he has covered the tech industry for multiple publications, including Ars
Technica, Neowin, and TechSpot.

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12 comments
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  • $104 billion value already includes the future growth trends

    So there is no basis why would FB's shares end up significantly higher than the initial $38.

    At the same time, experts believe that the expected growth will indeed follow, so the price does not have a force to pull itself down in any dramatic way.

    Next week will show the actual tendency.
    DDERSSS
    • Downwards

      A few lawsuits in the pipeline, people leaving in droves to twitter or just leaving their accounts dormant (I've been witness to this over the past 8-10 months), advertising leaving in their droves.

      But what really sticks in my craw, is the banks that bought the shares are pretty much bankrupt.

      Lets just hope they don't get another f**king bailout, because pulling stunts like this, they don't deserve it.
      Bozzer
      • Unlike ourselves, our labor, and our time, banks make this system work

        That's why we have to bail them out, even at our expense.

        We both know that's not true, but in a proper economy no bank would have needed any bailing out, and they became "too big to fail" because everybody else started losing jobs, pay, and everything else... (granted my response is simplistic, but the number of jobs vanishing each month between 2007 and 2008, after the lengthy trickle that had occurred before that crash... never mind all the taxpayer-funded subsidy they enjoy both then and now...)
        HypnoToad72
    • Sucker play

      EXACTLY! Why any investor should be expected to put money into a stock whose current price already reflects an absurd amount of growth potential is beyond me. The whole point of investing is to buy a stock with growth potential so that your investment pays off. Buying a stock that's already at a 100 to 1 P to E ratio is just looney. It's the kind of thing that happened at the height of the internet bubble, but that's because people were wildly over optimistic about these stocks, and many of these guys got burned as a result (how much is your pets.com stock worth these days?)

      What I think happened here is that the banks who issued this stock were hoping for a sucker play. They were going to get in at the ground floor and then ride the irrational Facebook mania of the rubes up to $50.00 a share. Then they'd spend the next few months cashing in much of their gain. Instead they found themselves suckered by an investing public that's grown far too wise for those sorts of shennanigans. And as a result they wound up having to bolster the stock price through mass purchases just to keep a floor under it.

      I hope those guys take a bath on this, because it's the same "screw the little guy" mentality that saw firms like Goldman Sachs selling worthless investment vehicles to their clients while simultaneously shorting those positions in their own portfolios.
      dsf3g
      • It's just business

        Once you or I invest, it's not "our money". It's theirs.

        What's worse is that companies tell us "Invest in 401ks for retirement. After x years at y%, you will be a millionaire in z years." Granted, they forget to tell people "Don't put any money into the stock market that you can't afford to lose..." Never mind companies used to offer pension plans of their own but then told people how much better 401k plans were... fast forward 20 years and now people have forgotten the past, and I don't want to fathom what things will be like to 20 years from now...
        HypnoToad72
  • Mark Zuckerberg, you're no Steve Jobs.

    Not. Even. Close.
    Userama
  • Guess my prediction were right on the money ....

    If you look back on this talkbacks, my prediction was that Facebook would open and gain about $5 a share ... but that by the end of the day, the value would be back to initial offering. What I didn't predict was the fact that it dropped back after only 4 hrs.

    Now, the next part of my prediction ... by the end of the month, the share will be $5+ LESS than initial offering and by the end of the year the stock will be in the single digits. (ie: $30 LESS than than initial offering).
    wackoae
    • Probably more than that.

      Expect the rags to promote facebook as much as they can.

      Except that most people who don't use facebook would never buy shares in it.

      And most people who do use facebook would never buy shares in it.

      This just leaves the bankers hoping to cash in.

      Scum.
      Bozzer
      • You may be right ....

        Less than a week since IPO and Facebook is already about $2.50 below initial offering.

        Can somebody post some pictures of the idiots who thought they were going to become millionaires overnight by investing on Facebook?

        At leas there is something positive of the entire thing ..... a lot of people learned from past mistakes and didn't throw way their money away on toiler paper stocks.
        wackoae
  • What garbage.

    The banks bought the shares because no-one else wanted to.
    Bozzer
    • When shares got to $43 each,

      who then cashed in? :)
      HypnoToad72
      • So you made $5 on a transaction that cost $7

        Who is happy??
        wackoae