The argument that Facebook should have offered their IPO at a lower price is hindsight. There were other IPOs in the past which opened low and when the stock shot up, the companies got criticized too because more money were made by Wall street than the people who actually did the work.
While true, from Facebook's long-term perspective, all of that is irrelevant. Had they IPOed much lower, the general public would be happy, but Facebook itself would have billions of dollars less in cash to grow their business. In the long run, the higher IPO price is much more beneficial to the company than a happy public today.
The ibankers got a 30% premium on a $16b place. Too bad for the little people...go cry on your walls major -- i don't think much of the money went to 'grow the business.' This was a cash out to early investors and employees. Ka-Ching!
According to this: http://www.businessinsider.com/ipo-pops-2012-5 Facebook raised $16B in total, though I'm not sure how much of it went to early investors vs to the company itself: Specifically, in Facebook's case, if Facebook had priced the IPO at, say, $30, instead of $38, it would have raised ~$12.5 billion in the IPO instead of $16 billion. In exchange for a bigger "pop," happier speculators, and a more enthusiastic press reception, in other words, Facebook and its selling shareholders would have sacrificed $3.5 billion that they can now use to create real value for the company and its shareholders (including its new shareholders). But if even just a third of it went to the company itself, you're talking about $1 billion worth of cash to Facebook that would have been lost pricing it at $30. That's about what they are expected to spend for Opera (or Instagram) - so basically pricing the IPO higher would have gotten them one of those two companies for free, which provides much more value for the long-term shareholder.
We'll have to agree to disagree. They upped the projected offering price range and expanded the number of shares on offer in order to, IMO, reward their investors at the expense of the average Joe getting in on the IPO, and let a bunch of people on the inside sell their shares as part of the IPO. That is not how it is normally done.
I don't see how anyone couldn't see this drop from the get go. It was destined to happen and will still go further. My "bottom" on FB has been $25, but now I'm more apt to say $19-22.
I only use facebook to plan with my friends. It's like email almost, it's easy to plan a vacation with a facebook group.
The average Joe doesn't get to invest at the IPO price. The people who buy at the IPO price are mostly the institutions and the preferred wealthy clients of the underwriting banks. Those are the people that paid the price of the higher IPO. The raised offering price was a direct result of high demand from those institutions. Morgan Stanley would have been screwing over Facebook to NOT up the price if the demand is there - you don't voluntarily sell someone else's stock at a price lower than the market is willing to pay. If Facebook had IPOed at $30, it would still have immediately shot up to $42, and the average Joe would still have bought it at that price and still been screwed over when everyone realized Facebook couldn't support that price. Changing the IPO price wasn't going to help - this is just what happens when people buy a stock because its cool or because they just have to have it instead of doing a smart analysis on it's value.
You don't know anything about how an IPO is normally done. There is also nothing normal about the people who actually have the opportunity to buy at the IPO price.
Sorry, but MS did nothing wrong when they upped the number of shares or the price of the IPO. This was an overhyped situation. Prices get out of control when hype gets out of control.
robbie -- don't you think they created a huge hurdle to overcome at $38 as all those buyers now want out? Few are looking at this as a long term google-type buy --especially at this valuation. Especially if it seems they were the ones supporting the stock on it's first day? Tougher to sell the next IPO, lots of selling to absorb before going much higher. At least that's what people smarter than me in these things have told me. They would want to price the IPO at 10-15% below where it will trade in the first few weeks.
The buyers weren't forced to buy. People were being greedy and everyone was expecting this thing to be trading at $50+ the day of the IPO. They were taking random stabs at Facebook's valuation by trying to use 2015 earnings per share even though there is NOTHING to base their future earnings power off of. Generally, when everyone is expecting something to happen it doesn't happen and things tend to go the opposite direction. Sentiment was FAAAAAR too one sided and an IPO is not a guarantee to make money for the people who buy at the IPO price. It is also not the underwriter's job to dampen the IPO price. Facebook is trying to get the best price they can get for the shares they are selling. They got a hell of a price and sold into an extremely hyped up market for their shares. Secondly, it is unimportant what prices people bought their shares at. The important thing is how Facebook manages to earn money. If Facebook is making a ****load of money then those people who want to sell in that $38 range will have ample buyers for the shares they are selling.
Facebook investors sue Zuckerberg over IPO Furious Facebook investors have filed a lawsuit against founder Mark Zuckerberg, alleging he knew the business had been overvalued ahead of its flotation last month. Zuckerberg floated his social networking site on the U.S. stock market for $100 billion but shares soon dropped in price, prompting complaints from many investors. Critics allege the CEO knew the stock was overpriced and protected his own finances by selling off the organisation, according to TMZ.com. Editors at the website report a lawsuit has now been filed against Zuckerberg, in which it's alleged the site did not generate enough revenue from advertising to warrant selling shares at $38, and that this information was passed on by Morgan Stanley, JPMorgan, and Goldman Sachs prior to the flotation. http://www.chron.com/news/article/Facebook-investors-sue-Zuckerberg-over-IPO-3607508.php
