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?
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