5 Votes
FaceBook's Botched IPO
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It’s been a week since FaceBook’s IPO and nobody is happy. The first issue was obviously the NASDAQ failure to open on time and properly handle the trades. FaceBook itself is facing a class action lawsuit over alleged insider trading (really? already?) with high value customers having a priority on purchases. Lastly, the investors themselves are angered over the significant drop in price since the IPO as poor media coverage and public relations have soured everyone on FaceBook’s commitment to shareholders.
Similarly tagged OmniNerd content:
- The Value of FaceBook, by VnutZ about 1 year ago
- Facebook Worm and User Relationships, by VnutZ over 1 year ago
- Does Internet Privacy Matter, by VnutZ over 2 years ago
- Public Facebook Data, by VnutZ almost 3 years ago
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Failure or Genius by mjperson
The press keeps saying it was a failed IPO, but honestly, it seems to me that it was highly successful. If you launch your company by having an IPO at $30 a share, and it suddenly goes up to $60 once trading starts, that’s a major failure. That means your company just left half of its potential operating capital sitting there. They should have released at $60, not $30.
If like Facebook, you release at $38, and the stock drops to $30, then you perhaps oversold, and your investors should have been more careful, but that’s not an IPO failure.
If IPOs we’re priced rationally, about half of them would sink on issue and half would rise. That would indicate the backers know what they are doing. If they always “pop” right after issue, that means the backers are taking advantage of the companies and the investors, making a huge profit from the disconnect between them.
Calling this a failure because Morgan Stanley failed to make piles of money by paying too little for the initial stock and then selling it for market price after it popped is just silly. It may be a failure for Morgan Stanley, but it’s not a failure for Facebook, or us investors who are buying now that the market price has stabilized.
RE: Failure or Genius by VnutZ
The notion of failure, however, is largely with the NASDAQ system as opposed to the inaccurate assessment of pricing. NASDAQ really screwed the pooch with getting its system up and running to process and report orders accurately – which greatly affect legal compliance by the trading brokers to give “best price” to the buyers.