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Facebook’s IPO: Worst of the Decade

Facebook’s IPO: Worst of the Decade

To the list of superlatives to add to Facebook’s list, Bloomberg has added “worst IPO of the decade.”

A week ago — was it only a week ago? — Facebook went public on the Nasdaq, offering its shares for $38. After rising to $42.05 at the start, the shares closed at $38.23. On the second day, they closed at $34.03. On the third day, they went down to $31, more than 18 percent below the IPO. Today, Friday the 25th of May, the sixth day of Facebook’s existence as a publicly traded company, its stock closed at $31.90, down 3.4 percent.

A Flop of an IPO

In its first five days of trading, Facebook has done worse than a company that is now in bankruptcy, MS Global. As markets reporter Sheila Dharmarajan said on Bloomberg,

“It really goes to show the magnitude of the flop of the Facebook IPO.”

33 underwriters from Morgan Stanley set Facebook’s IPO price at $38. Now, the US Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) have announced a probe into whether an analyst shared negative information about Facebook with some institutional investors prior to the IPO. The company is being sued by shareholders, alleging that critical information was withheld from them. The Nasdaq is being sued by Maryland investor Philip Goldberg, who has filed a potential class-action suit against it, on the grounds that investors lost money due to technical problems which delayed Facebook’s market debut by a half hour.

A number of investors have complained that they “didn’t receive confirmation of their stock purchases until days later” and so ended up paying a higher share price than they originally thought. KTVU cites the example of Travis Campbell, who bought 120 shares on the day of the IPO at $40. Initially, his order was listed as “expired” and his account did not show the purchase so he concluded that he had not been “bitten by the insider trading bug that helped flop the IPO.” But by Tuesday, when the price had fallen to $32, Campbell learned that the deal had gone through and at the original price of $40 a share.

Facebook: Gracelessness, Greed, Hubris, Etc.

Sizing up a week of gracelessness, greed, hubris and incompetence (and securities law violations) in the Guardian, Heidi Moore suggests that Facebook’s bungling of what was being called the “People’s IPO” bears more than a bit of resemblance to Facebook’s constantly changing its design (a new format for Timeline is being tested), its privacy settings and more without informing its users:

The fact that sophisticated investors knew the company was warning them about its prospects could have been enough to account for the determined selling of the stock from almost its first minute. Wall Street investors are far less patient with changing the goalposts than are the 900 million users of Facebook who accede to every whim of the company’s changing user agreements.

A central critique of Facebook has been its apparent inability to know how to capitalize on its 900 million users, and the extensive amounts of personal data they provide the social media site with, for a profit. In particular, Facebook has shown itself unable to monetize its mobile app, a significant problem because, more and more, its users are accessing the site from a mobile device. Facebook’s recent purchase of Instagram, and its release of a similar-seeming mobile app, Facebook Camera, are apparent attempts to remedy the issue.

Such efforts may well turn out to be so much past-posting. Facebook’s users keep returning faithfully to the site. After the past week, do you feel at all less inclined to post so much of your personal data, from status updates to photos, on Facebook?

Related Care2 Coverage

Shareholders Sue Zuckerberg and Facebook: Un-friendly and Un-friendlier

On The Third Day, Facebook’s Stock Falls Again

On the Second Day of Trading, Facebook Fell

 

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32 comments

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9:01AM PST on Feb 19, 2013

Thanks for sharing.

7:58PM PDT on May 27, 2012

Well I did buy 200 shares of Facebook Cheap..It will go up in time..I have been a investor for years and have seen this happen before like with Amazon and look at it today.

4:51PM PDT on May 26, 2012

I'm glad I didn't buy any shares of Facebook, although I did consider it. I guess I dodged a bullet there.

I admit that I do have a FB page but there is really nothing on it. I think I have a grand total of 15 friends on FB. I just don't understand people who feel the need to put every aspect of their lives out there for the world to see.

I suspect that FB may be on it's way down anyway. None of these trendy things last all that long. Afterall, FB replaced MySpace as the top social site just as Google beat out Yahoo. I would bet that Zuckerman and his cronies knew bad times were coming and did the IPO as a way to make some fast cash before the bottom falls out.

4:17PM PDT on May 26, 2012

On Chris Hayes' show this morning, stock experts admitted that all stock offerings are stacked in favor of the rich and the big players. They give them inside information that they don't give to small, individual investors. People realize the deck is stacked. That's why after many people lost their shirts in the economic downturn Wall Street caused, many never went back into the stock market, but the hope on Wall Street was, this would lure the chumps back. But they told the big players, and neglected to tell the regular people, that Facebook's growth had started to slow. So the rich bet against the suckers of the 99%. The rich always get theirs and screw everyone else.

3:44PM PDT on May 26, 2012

The Nasdaq exchange messed up by not being prepared for the popularity of FB's IPO. Ultimately, Facebook is now trading fine, all the orders are going through no problem (I'm a daytrader, so I watch FB trade out of amusement).

The declining price of FB's shares, however, is no surprise and I think that Facebook is trying to blame it on Nasdaq's flop. That's already been fixed and moving to the NY Stock Exchange isn't going to change its declining value, it will still trade like crap until investors decide its fair value, THEN it will start to go up. Threatening to move to the NYSE is simply a tactic to gain the public's faith in FB again, by making it look like Nasdaq's fault. Pathetic.

I wouldn't buy Facebook, nor can I recommend anyone I care about to buy it. It needs to bottom out in price first as its shares were waaaaay overvalued from the get go. Anyone whose orders were delayed on the first day and were filled the Monday or Tuesday following at least got it at a cheaper price.

At the end of the day, do you really want to invest in a company whose profit margins come from taking your personal information and selling it to advertisers?

1:22PM PDT on May 26, 2012

I'm not surprised with the mess concerning FB. FB's so called recent improvements have made playing games on it a nightmere. So far ass the games that are played at the New York Stock exchange I say it seems that they have caught up with them. Too bad for FB.

11:29AM PDT on May 26, 2012

I really can't wait for FB to sink so that (hopefully) a better social site is created. I hate to sound like a whiner, but I feel like FB has become nothing more than a living advertisement for companies at the expense of things like user interface and security.

11:14AM PDT on May 26, 2012

No Facebook for me and I certainly agree with others regarding businesses who can only be contacted via facebook - who needs them?

10:21AM PDT on May 26, 2012

I used to like Facebook but I hate how they keep changing it. And the default privacy settings, ugh...

10:19AM PDT on May 26, 2012

Too bad, so sad!

Never will I be a Facebook user...why would I want to or have to reveal my entire life on Facebook? The people I really care about already know me! In this day of cybercrime, the last thing I want to do is make my life available to any manner of hackers and criminals!

Businesses had better know that not everyone is on Facebook (or Twitter)...if I can't get to you unless I'm on Facebook, then you've lost a valuable customer!

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Kristina Chew Kristina Chew teaches and writes about ancient Greek and Latin and is Online Advocacy and Marketing... more
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