I told you so. I told anyone who would listen yesterday that investing in Facebook's IPO would be foolish and I was right. Facebook closed its high-excitement IPO day at $38.37 a share... mere pocket change over its initial price.
On Thursday, Facebook had priced its shares at $38, giving itself a valuation of $104 billion, and raising $18.41 billion. Too bad the market didn't believe that valuation. Oh sure it may look like Facebook, which was to have gone public at 9:30 AM Eastern Time, but actually only started trading on the Nasdaq under the “FB” tickerat 11:00 AM EST, but the stock actually would have dived like the Titanic if it wasn't for the the company’s 33 underwriters buying up shares to keep it afloat and above water at just over the $38 offering price,
Bullish, would-be buyers had predicted that at the end Facebook's first day as a public company that the stock would be selling at $54 a share. So much for that pipe-dream.
Facebook started tanking almost from the start, After opening at $42.05 a share, a gain of almost 11 percent, the stock started on its way down. By day's end, the only reason Facebook hadn't declined below its opening price was that its underwriters kept buying massive blocks of the stock. And, buy it they did. Facebook, according to the Wall Street Journal (WSJ), had the highest volume of any IPO in history: 460 million shares by 3:07pm EDT.
So, how bad was it? Well Mark Zuckerberg and his cronies won't be crying. They made out like bandits. As David Benoit, a lead writer of the WSJ put it, “There have been a lot of questions about how Mark Zuckerberg and the Facebook team will respond to this. They won't. They don't care. “ After all, Benoit continued, “Oh and “If you don't agree with that comment, that Facebook and Zuckerberg don't care, and think investor pressure will overwhelm him...remember he controls well over 50% of shares for voting purposes.”
I mean come on, Zuckerberg even said as they sent the IPO in its way that Facebook's “mission isn't to be a public company.” In other words, Zuckerberg got his. You? The stock holder? You're not his concern.
But, then if you'd been paying attention you'd already know Zuckerberg and company would do just fine and that your bottom line wasn't his bottom line. For Mr. and Ms. Stock Buyer, aka the poor saps who actually bought the stock, well, Dennis Berman, the WSJ's deputy bureau chief for Money & Investing tweeted it well, “Virtually every single investor who bought Facebook shares today has already lost money.” He got that right.
Why did that happen? I told you yesterday. But, to give you the quick summary, Zuckerberg is a CEO with no controls on him with barely a clue about how to run a business; Facebook has already grown as much as it can grow; Facebook has many rivals, and its users could abandon it just as fast as they did MySpace and other previous social network “success: stories. Oh, and have you heard about the $15-billion class action lawsuit for Facebook breaking wiretap laws? Oh yeah, this stock is going to do just dandy in the days ahead.
So what happens next? Bad things. Today, the underwriters were desperately keeping it up. Today, shorts couldn't real get to the stock. Next week? It's going to be ugly, really ugly.
Facebook closes at $38 on day one
Zuckerberg: “Our mission isn’t to be a public company” (video)
Facebook hit with $15 billion class action user tracking lawsuit
Is Facebook’s IPO an exit strategy?
Don’t be a Facebook IPO idiot