Facebook stock ‘a total disaster’ in big public debut

“Facebook Inc. shares got off to a rocky start in what has been the most highly anticipated initial public offering in history,” Joe Bel Bruno reports for The Los Angeles Times. “Facebook founder Mark Zuckerberg rang the Nasdaq opening bell from company headquarters in Menlo Park, Calif.”

“The stock jumped more than 10% in the first few minutes of trading. But then sellers swept into the market and that gain evaporated,” Bruno reports. “‘It’s a total disaster because the stock is trading right at the IPO price,’ said Francis Gaskins, editor of IPOdesktop.com in Marina del Rey. ‘They didn’t want that in a million years. A traditional IPO is up 10% or 15%.'”

Bruno reports, “The inauspicious opening suggests that retail investors paid close attention to reports of soft financials and big selling by insiders… There had been hopes that Facebook’s IPO would be a shot in the arm to the broader markets. But that too appears to have fallen by the wayside. Major U.S. stock indexes were all higher in the hours leading up to the public offering. Once Facebook shares began to weaken, however, so did the market.”

MacDailyNews Take: Facebook (FB) is currently trading at $38.13, +0.13‎, or +0.34%‎.

Read more in the full article here.

Stephen Gandel reports for Fortune, “Add taxes to the potential reasons the social network’s stock didn’t pop in its IPO. The issue is the $4 billion dollars that will be owed by Facebook’s employees as part of their stock windfall in six months. That tax bill is almost certain to lead to a wave of forced selling of at least 100 million of the company’s shares, and quite possibly much more, within the next six months. The risk of all those shares flooding the market was likely a weight on Facebook’s offering.”

Read more in the full article here.

Andrew Tangel reports for The Los Angels Times that Facebook underwriters are propping up the stock as it nears break-even marks: “The big Wall Street banks that brought Facebook public scrambled to prevent the stock from collapsing into declines.”

Tangel reports, “The underwriters averted a potential debacle by scooping up shares of the company during the Nasdaq debut. This propped up the stock, keeping it above the $38 offering price through most of the day. ‘When a deal gets priced and breaks price on the first day, that’s definitely a major embarrassment,’ said trader Andrew Frankel, co-president of Stuart Frankel & Co. “‘But it didn’t do that here – at least for the time being.'”

“The practice is pretty standard during IPOs, especially high-profile ones like Facebook. The big banks buy into a wave of selling as a way to prevent their customers from suffering big losses,” Tangel reports. “The stock bolted at the open to $42.05, but then quickly withered in the first hour of trading. It touched $38 several times, but eked out a small rebound…”

Read more in the full article here.

MacDailyNews Note: Next, Zuckerberg will be on the iPhone begging Cook for Ping integation.

87 Comments

  1. I may overlook the fact that I do not like the product. But I see no future in facebook. I personally don’t get it or why its any better than myspace.

    Lastly, Zukerberg. He made money off of something that wasn’t even his idea, he cheated those who came up with and hired him to create it. Not even a one trick pony.

    Maybe Zuck is the genius everyone is so sure he is, but I don’t see it.

  2. Facebook’s stock IPO price was why beyond Facebooks actual value.
    As Facebook’s value was best defined by my kid who said, “Facebook is for old people and creepy people that think they are part of the in crowd because they have a Facebook account and live by lurking in Facebook.”.
    I asked my kid what they thought about Facebook Credits, The Reply was, “Why do companies like Facebook and Microsoft go other of their way to try had hide the actual price of stuff. They also think we’re stupid in the fact that they want us to give them cash for something that has no value and is not redeemable for real cash. Do they think that we’re stupid and don’t understand money or is their goal to try and trick us into spending more money on stuff. A dollar is a dollar but a Facebook credit or Microsoft point is worthless and has no value.”.

    So, the cool kids don’t like or even use Facebook. So, Facebook’s stock price is worth about as much as a Facebook credit or Microsoft point to my kid, Zero.

  3. The only way Facebook becomes profitable is if it sells its soul.

    Not saying anything is necessarily wrong with that (at some point most of us who want to make a decent living do it some degree). But it won’t be the Facebook that hooked millions of people into it. Instead of being a place where you “meet” your friends, it’ll become a place where you meet your friends with 50 vendors hollering in your ear about minivans, satellite television and the best damn clothes washing detergent on the planet.

    At that point, it’ll shed most of its hippest members to some other startup and the cycle will begin again. I just don’t see social networks making money without lots and lots of ads. And I don’t see people using it as much if that becomes intrusive.

  4. AAPL stock has gone from 71% to 69% institutional holdings. Where did the 2% go? A lot of it probably went to prop up the Facebook IPO price so it didn’t go below 38.

    To double one’s money on Facebook stock over the next 5 years, it would have to double its market cap to that of Googles and bring in 10x the current revenue of $4billion.

    Therefore I would say that the proper valuation of today’s faecebook stock should be about $3.80 a share with a market cap of $10 billion.

    The whole reason for the capital raise is to pay back the $50bn foreign private equity raised by Golman Sachs. No doubt these are the people who are selling the majority of shares, which they must have purchased or converted at a discount, because who else could make any money from selling right now?

    1. Exactly.
      How many server farms are worth billions?

      They are one PR disaster away from tanking because the whole edifice is based upon consumer sentiment.
      This is the South Sea bubble / Dot.com bust revisited.

  5. What good is Facebook for?
    1) Exposing dumb people without a life on a global basis.
    2) Confirming suspicions that certain people are pretty shallow and vacuous – and they just won’t shut up. What is that proverb about staying silent and keeping people guessing instead of opening your mouth and confirming all suspicions?
    3) Cheapening the value of real poets, thinkers and intellectuals by allowing anyone to post crap masquerading as intelligent discourse, usually accompanied by a predictable clicking of “like” by a coterie of even more idiotic, robotic and self-serving “followers”.

    Facebook is an unproductive fad, a souped-up online message service. It’s become so embedded in popular culture and such a crutch for the kinds of people outlined above that it will survive until something better comes along. But I think its status as a global mover and shaker will gradually fade.

      1. Maybe so. But I have never seen an MDN post which says simply: “Eating lunch! Yoo-hoo!!” Or another one: “Sleepy. Going to bed.”

        The classic I’ve come across a few times is: “Yawn”

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