MarketLine Blog

Facebook’s flotation: better late than never

 

Last Friday (May 18th) saw the most highly-anticipated flotation in recent memory as the world’s most popular social network debuted on the NASDAQ stock exchange. But not before an embarrassing delay.

The most talked about IPO in the history of Silicon Valley did not get underway until two hours after Mark Zuckerberg had sounded the opening bell at 9 a.m. EDT due to a technical error on the part of NASDAQ, a mistake which has left the stock exchange very much red faced.

This did little to dampen the enthusiasm of investors however, and according to Reuters, 82 million Facebook shares were traded within the opening 30 seconds of its debut.  This early frenzy saw the share price climb from its list price of $38 per share to as much as $45, valuing the company at $115 billion. Within an hour, shares had settled around the list price and the stock closed the day at $38.23. This represented an increase of just 0.2% on the opening price, a performance that many analysts deemed lackluster. Max Wolff, senior analyst at Greencrest Capital, even went so far as to compare Facebook’s debut to a “starlet tripping on the red carpet.”

Question marks remain over the value of the company, with much of the early momentum lost. On Monday (May 21st), the second day of trading, the stock closed at $34.03, a fall of more than 10% on its opening price. Many analysts have questioned the role of the company’s bank, Morgan Stanley, in advising Facebook to issue more shares and at a higher price than originally planned and have blamed this on its less-than-stellar performance.

The fact remains however, that Facebook broke the record for the most shares traded on a company’s first day as a listed entity with 566 million sold and this illustrates the enthusiasm for the company among investors, investors that Facebook must now satisfy by maintaining and growing returns.

The company’s founder Mark Zuckerberg celebrated the IPO by marrying long-time girlfriend Priscilla Chan. The pair looked the picture of marital bliss when snapped by the paparazzi, whether Facebook’s relationship with the stock exchange proves to be as happy remains to be seen.

To gain a more in depth understanding of Facebook’s meteoric rise and the challenges it faces in the future, access the full MarketLine research, ‘Facebook Case Study: How a social network became a multi-billion dollar business.’

 

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