Facebook's IPO - NASDAQ's Biggest Bust? - The UpStream

Facebook's IPO - NASDAQ's Biggest Bust?

posted Saturday May 19, 2012 by Scott Ertz

Facebook's IPO - NASDAQ's Biggest Bust?

The road to an initial public offering (IPO) has not been an easy or straight-forward one for Facebook. With a lawsuit from Yahoo!, purchasing Instagram for $1 billion, then patents from Microsoft, all requiring them to miss their target date, the road as been a little rocky.

The road did not get any smoother when the IPO went live Friday morning. The NASDAQ, preparing for their largest IPO ever, had system failures early in the day, causing Facebook's trading to begin a full half-hour late. At least Zuckerberg got to ring the opening bell at the exchange. All of that said, there were two ways an IPO from the social giant could have gone: a failure like Groupon, or a success like LinkedIn.

So, how did it actually go? Hit the break to find out.

Despite all of the problems, Facebook's stock was still predicted to be in the $50 - $60 range. When the closing bell rang, however, the price was an appalling $38.37. Not only is that two-thirds of the expected price, it was almost a full $4 LOWER than the opening price of $42. Not quite the disaster that was Groupon, but no LinkedIn, either. All-in-all, Facebook walked away Friday with an extra $16 billion in cash. Not too shabby, but not the stuff billionaire dreams are made of for Facebook employees.

So, what happened? Part of the problem was that valuations were coming out of west coast investors, all of whom are much more obsessive about tech companies and optimistic about their futures. Unfortunately for Facebook, most of the people with real money are on the east coast, and they were not as ambitious. In fact, in general, the belief was that the stock price might stay strong at $42 by the end of the year.

That is a little bit of a difference, and, as usual, it appears that the east coast investors were right again. That aside, this is just the beginning of a long journey for Facebook shares and it is anybody's game now.

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