Facebook IPO Disappoints

On Friday Facebook (FB) had its initial public offering (IPO). It opened up at $38 per share. It traded up to over $45 per share then slid throughout the day, finally closing at just $38.23. After all the hype, this was really a less than glowing outcome. Throughout the day the $38 level was not breached. Late in the session, the share price rapidly vacillated back and forth between $38 and $38.01 for a very long period of time. The selling syndicate was compelled to not let the price drop below its initial offering price in the secondary market; they succeeded in that effort. They had to continually buy back shares to support that $38 price. They were probably relieved when the market finally closed and their bleeding stopped.

The ability of the large institutions to control stock prices in the secondary market was clearly demonstrated with the Facebook IPO. This is the exact reason that I try my best determine what direction the large player institutions are trying to push a stock or the market.

I am sure that the current negative sentiment in the market in general had a large impact on the Facebook offering. But, I also think that both the general public and investors as a whole are much savvier than in the past and are less willing to blindly jump on the hype bandwagon. There is no doubt that Facebook has had an amazing impact on world. I will be watching closely to see how it trades in the next few weeks. Longer term it very well may make investors wealthier. For now it has just made Facebook employees and FB's venture capitalist wealthier.

Stephen


Addendum: Why FB would not fall below $38 on opening day

Massive bids from the selling syndicate at $38 provided a
rock solid line of support for FB shares in the after market.
They did not want to suffer a black eye from shares selling below
the offering price on the first day.