Facebook Stock Barely Holds Above $38 IPO Price

May 19, 2012 Updated: October 1, 2015
facebook trading
A television anchor stands in front of screens showing the start of trading in Facebook shares at the NASDAQ stock exchange on Times Square in New York, on May 18. Facebook shares finished last Friday up marginally from the IPO price. (Emmanuel Dunand/AFP/GettyImages

NEW YORK—Investors who didn’t qualify to be among the exclusive group that bought 421.2 million shares of Facebook Inc. at the initial public offering (IPO) price of $38 will now get a second chance—that is, if they still want it.

After its first trading day on the Nasdaq Stock Exchange, Facebook’s shares finished May 18 at $38.23, just 0.6 percent above the IPO price.

Opening at $42.05 Friday morning, or 10.7 percent above the offering price, and peaking to $45 during the day, investors quickly sold their shares of the world’s No. 1 social networking company. Facebook saw 580 million of its shares traded on its first day.

But to call Facebook’s first day of trading a disappointment was an understatement.

Even the small appreciation last Friday is speculated to be artificial. Forbes reported that it is widely believed that the deal’s underwriters played a large role in keeping the stock price from dropping below $38 during its first trading day. During the last 30 minutes before the closing, high volume of shares changed hands even though the stock did not move more than a few pennies above $38.

Morgan Stanley, Goldman Sachs Group, and JPMorgan Chase led the Facebook offering, which involved over 30 underwriters.

Facebook was able to sell a chunk of its shares on Nasdaq, which is the heart of an IPO. By that measure, the IPO was a success. Early investors were able to cash out at a good valuation for the company.

But by almost any measure—and factoring in the company’s immense anticipation prior to the IPO, including relative to other recent internet company IPOs—it would be cast as a disappointment.

The Palo Alto, Calif.-based Facebook raised $16 billion for itself and early shareholders after selling 421.2 million shares of its common stock at an IPO price of $38 each, making it the third largest offering in the United States behind Visa and Italian utility company Enel.

The widely successful social media company was started in a Harvard University dorm room by then-sophomore Mark Zuckerberg.

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