Facebook closes at $38 on day one

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?

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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