On Friday, Facebook’s initial public offering made its debut in public markets. It was far from the hullabaloo it was built as and there was some trouble out of the gate as the NASDAQ delayed opening trading to around 11:30 am EST.
Once things got going and investors were invited into the social networking fold for the first time, Facebook enjoyed the third largest opening in United States history and the biggest ever for a tech company. The stock started the day valued at $38 a share and closed at around the same point, hardly ballooning but hardly the “failure” that some were champing at the bit to report. For Facebook, the IPO did what it was supposed to do. And for early investors, they were able to cash out some of their investments at a good price.
But with the weekend over, Facebook took to the market on Monday and dropped 11 percent on their second day of NASDAQ trading.
Facebook finished the day at $34.03, down 10.99 percent (or $4.20), to be exact, from where it closed on Friday. Comparing that to the opening Friday price of about $42.05 and you’re looking at a pretty stiff drop.
The problem, according to analysts, lies with the fact that demand for Facebook stock was overestimated. Wedbush analyst Michael Pachter slapped FB with an “outperform” prior to the IPO and stated that the extra shares dumped into the market by the social networking giant’s stockholders may have flooded things out a bit. The price was “limited” as a result and the price was held down to more “reasonable” levels, hardly reaching the frenzy predicted.
It’s also possible that NASDAQ’s delays caused some trouble with Facebook’s ability to move more shares. Some investors say they were “locked out” of buying shares in Mark Zuckerberg’s baby (and they now claim to be better off), while other investors and brokerage firms couldn’t get in on the action at desired prices and are out for NASDAQ’s blood. The Financial Industry Regulatory Authority will be reviewing the situation and reporting on the total value of claims.
With its shares below the initial IPO price on the second day of trading and the much-awaited “pop” never having arrived, can it be said that Facebook’s initial public offering was a flop? From a market perspective, perhaps. But from the perspective of a Palo Alto-based company filled with young minds and no real significant revenue stream (outside of some advertising money), you have to think those Facebook whole wheat low fat flax waffles are tasting pretty good about now.