Facebook hits $105bn mark – but only after underwriters step in
Investors miss out on expected boost from first day – but shares still meet valuation
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 19 May 2012
The underwriters of Facebook's much-anticipated public share offering had to intervene heavily in the market to keep the social network from falling embarrassingly below its float price on the first day's trading yesterday.
The company sold $16bn of shares at $38 apiece and the stock closed last night at just $38.23, meaning that buyers missed out on the typical first-day pop and investors pushed questions about the long-term profitability of the company to the fore.
The closing price puts a $105bn valuation on the online status updates, baby photos and "likes" of Facebook's 900 million users around the world.
Except that value reflected significant buying by a syndicate of underwriters, led by Morgan Stanley, who had pushed the sale price to the top end of the $34 to $38 price range during what was an occasionally frenzied pre-flotation roadshow to investors. Another complication was reports of problems with the trading systems at the Nasdaq stock market, where Facebook has listed its shares. Traders reported delays and confusion over the reporting of their orders for the stock, prompting some to pull back from the market.
Many retail investors also appeared to have heeded warnings that buying on the first day of trading can be dangerous and that it may be best to wait for the stock to settle. Facebook shares were volatile, immediately jumping by 13 per cent to hit $42.99 in the early trading. When, they fell back to $38 on several occasions, underwriter buying activity saved them from going into the red. One of the most eagerly-anticipated days in technology investment history appropriately kicked off with Facebook's chief executive, Mark Zuckerberg, remotely ringing the bell to start trading on New York's Nasdaq. After delivering the toll to applause from his colleagues at Facebook's headquarters in California, Mr Zuckerberg hugged his chief operating officer, Sheryl Sandberg, and handed out high-fives in scenes reminiscent of the dot.com boom of the late 1990s.
Facebook executives had good reason to celebrate the IPO, which has spawned six billionaires and more than 1,000 millionaires at the company, at least on paper. Mr Zuckerberg, 28, who set up Facebook in his Harvard dorm room in 2004, is most quids-in. His stake was worth $19.1bn at the float price. Peter Theil, the PayPal founder who invested $500,000 in the firm in 2004, sold 17 million shares for $640m in the share offering. He retains 28 million shares.
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