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.
See also:
- Facebook IPO: Final numbers
- Facebook sets IPO share price at $38: $104 billion valuation
- Facebook files for $5 billion IPO
- Facebook's IPO in pictures and Facebook's IPO by the numbers
- Facebook updates IPO filing to underline Zynga deal
- Facebook details Zuckerberg's $500,000 salary, 45% bonus
- Facebook amends IPO a fourth time, includes Q1 2012 financials
- Facebook sets $28 to $35 IPO price range
- Facebook roadshow kicks off with a video, IPO prospectus released
- Facebook offers 50.6 million more shares, new $34-$38 price range
- Facebook increases IPO by 25%
- Facebook options trading to begin on May 29
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