Facebook has priced its IPO at $38 per share, and will begin trading tomorrow on the NASDAQ under ticker symbol "FB."
This means that the company raised around $16 billion — or around $18.4 billion assuming the the "green shoe" is exercised — and will have an initial market cap of nearly $84 billion (the fully-diluted figure brings it past $100 billion).
The $18.4 billion figure would top GM for the second-largest IPO in history (just behind Visa).
Live Updates: Monday 5:30 p.m. Facebook Stocks Fall Hard:
Facebook's stock is tumbling well below its $38 IPO price in the social network's second day of trading as a public company on Monday.
By late afternoon, Facebook's stock was at $34.26, down 10.4 percent from Friday's closing price of $38.23. The company lost nearly $10 billion of its market value, and is now worth around $96 billion, about $2 billion below Amazon.com Inc.
Monday 12 p.m. Mark Zuckerberg and GF Priscila Chan Have Suprise Wedding as Facebook Stock Initially Falls Flat:
From PolicyMic Pundit Dyna Nyma: As Mark Zuckerberg marries long-time girlfriend Priscilla Chan on the wake of Facebook's historic IPO, all the hype surrounding Facebook’s IPO somewhat ended in a deception. While many analysts had anticipated a surge of over 25%, Facebook stock closed at $38.23, for a gain of 0.61%, which is only 23 cents beyond its introductory course. Not quite a surge!
Yet within minutes of opened trading, Facebook shares soared by 12%, but all gains later vanished to return to its initial value. And the situation could have been worse ifunderwriters would not have stepped in and buy shares to keep the price from slipping below its IPO price. So why didn’t Facebook pop on its public debut?
The initial Facebook price ranged from $28 to $35. But given the enthusiasm generated by the IPO, and to meet a huge demand, the company not only added 50 million more shares but also priced the stock at about $34 and $38. This might have left no much margin to any potential increase. A chief investment officer at Palisade Capital Management quoted by Reuters said that the social network “squeezed the lemon dry” and did not leave room for a “better support of the shares in the aftermarket.”
It also appeared that the market was not that confident about the whole operation. Goldman Sachs, which also actively participated in Facebook’s development, ‘got rid’ of half of its 22% shares before even the trading went public. It was followed by Peter Thiel (another insider), who sold 50% of his shares instead of the 22% previously announced. Questions were raised on why were company insiders detaining longtime shares selling them just a day before they go public? It sent negative signs on the project’s dynamic and contributed in establishing a suspicious climate on the market debut.
Investors are concerned about Facebook's real capacity to generate profits in a sustainable way. The company earned $3.7 billion in sales in 2011 (10 times less than Google) and made no secret that it was struggling to cope with the gradual users’ (448 million already) migration tomobile devices that allow little or no advertisements. Especially, since it gets most of its revenues from advertising. In fact, Facebook's profits for the first quarter of 2012 fell to $205 million and revenue growth is expected to slow for a third year, whereas the marketing costs have doubled.
The concerns were compounded by General Motors' announcement the withdrawing its $10 million ad campaign from the social network, prompting a debate on the effectiveness of advertising on the site.
Facebook's business model leaves uncertainties about its future. It will probably have to diversify its sources of revenue without frustrating the users, who are there mainly to chat with friends and not looking for bargains. For its IPO, the company only managed to avoid embarrassment, thanks to the underwriters. However things could get complicated in the coming weeks if it were to face it all alone.
Friday: Facebook Closes at $38: Facebook hit the tape in its debut at $42.05 per share, up 11 percent from the $38 per share IPO price. The stock meandered around $40 for most of the day, before closing at $38.23. While the deal was huge -- the second-largest in U.S. history -- the first day of trading was more whimper than bang.
4:05 pm: Some Notable Notes:
Facebook trading volume exceeds 375 million within first three hours of listing, more than 6.5% of total market volume. Volume on track to beat prior record of trading volume on day of IPO. More than 375 million Facebook shares changed hands so far today.
3:07 pm: FB stock up 2% for the day, currently sits at $38.71
3 pm: NASDAQ Glitch Leaves Investors Guessing: Individual investors were left guessing for more than two hours on Friday about whether their buy and sell orders for newly issued Facebook shares were actually executed.
Exchange operator Nasdaq OMX Group had problems sending electronic messages back to the brokerages that handle orders from individual, or "retail," investors orders, said sources with direct knowledge of the situation.
Because the acknowledgements didn't come back from the exchange, the brokers were unable to tell their clients that trades had been executed.
1:15 pm Social Media Stocks Take a Beating
Because Facebook didn't pop as much as many had expected, other tech stocks were logging sizable declines.
Trading in Zynga was halted after the stock fell more than 13%, reaching an all-time low at $7.17. LinkedIn was down more than 6%, Groupon fell more than 7% and Renren, the Chinese social network, was off about 13%.
From PolicyMic Pundit Dyna Nyma:
We all knew that Facebook paid features were going to arrive one day, but now that day seems closer than ever. With over 900 million users worldwide and its market debut, the social network is apparently seeking new ways of generating revenues, even if it means receiving those contributions directly from its' users.
As of now, regular users do not have to reach into their wallet so that their views and updates can be seen by their network. But, maybe that is about to change. Facebook is testing a new feature which, for different prices starting from $0 and going up to $2, individual users could promote their posts and increase their visibility to family, friends, and colleagues. Currently tested in New Zealand, if proven successful the ‘Highlighted posts’ item could make its appearance everywhere else very soon.
A Facebook spokesperson confirmed the new tool to the BBC, adding that the test was meant to “gauge people’s interest in this method of sharing with their friends.” Earlier this year, Facebook revealed during its Marketing Conference that only 12% of updates are seen by a users' friends; this is partly thanks to the Facebook algorithm that carefully sorts what important information should appear in our news feed. Now, maybe we should all be pleased to hear that they are on the verge of discovering a solution for our avatars to stay a little longer on the homepage and at the top of our friends news feed ... and all by simply paying for it.
Facebook has always been an interesting marketing tool for companies and the ‘pay to promote post’ already exists in the form of advertisements or other Facebook pages. But extending this system to everyone would not make sense. Indeed, it makes one wonder why average users would pay to promote their statuses, profiles, or vacation snap shots to their own relatives and friends. Unless, of course, you are willing to pay for some sort of narcissism.
It also somewhat falls in contradiction with the other recent Facebook developments. In fact, we currently have the possibility (that we never had before) to choose what we want to see or hide from our friends. But, unfortunately or fortunately with the ‘highlight’ everyone feature comes the possibility to view more posts but also to be more suceptible to spammers.
However, this feature could help Facebook overcome the site's reduced ad visibility; especially on the mobile site which has greatly helped the development of the company.
Although Facebook‘s registration is “free and always will be,” as indicated on the network homepage, if this little innovation sees the light of day, it might mark the end of the ‘all free’ era. This may be the beginning of a new Facebook era with dual functions; a new and improved version that will cost you, or the usual version for free.
11:45 am: Facebook stock jumps 10% in Nasdaq debut, rising to $42 in minutes:
11:15 am: Pros and Cons of FB: From global market insight service Wall Street Pit: Facebook is not exactly making tons of money from its 900 million users. In other words, the company has yet to figure out how to drive revenues from its users the way Google has done with its advertising and other broad Internet services and assets. Perhaps Facebook will be able to evolve over time given its access to capital; but, for the time being, I really question the market value assigned based on my stock analysis.
Facebook will need to expand its revenue stream away from being predominately advertising, but this will not be easy, as more experienced companies such as Google also want to expand into the social networking space currently dominated by Facebook. There’s also the excellent “Skype” service that is owned by Microsoft Corporation (NASDAQ:MSFT), but has yet to be fully harnessed. However, this could change. You can read my thoughts in, Should Apple Worry? Microsoft Targets Mobile Market.
11:00 am Trading Kicks Off: Why didn't FB start trading at the opening bell?
The most hyped IPO of the year is here, but you won't be able to trade Facebook's stock right when the market opens at 9:30 on Friday.
That's because Facebook will trade on the Nasdaq exchange, which doesn't open up initial public offerings until a bit later in the trading session.
The company in question -- right now, that's Facebook -- can decide when to debut and works with Nasdaq to set the time. Technically, an IPO stock could even start trading in the afternoon, as long as it's well before the closing bell at 4 p.m. ET.
But most recent Nasdaq IPOs have typically begun trading a few minutes before 11 a.m. ET, including Groupon and Zynga.
10:15 am: Facebook (FB) first day of trading predictions:
Facebook stock begins trading at 11:00am on Friday, with an initial price of $38.00/share and a valuation of $104 billion. But how will in perform in the future?
From PolicyMic Pundit and former investment banker Sal Bommarito:
Facebook (stock symbol: FB) was valued at $104 billion ($38.00/share offering price) in an initial public offering on Thursday and will begin trading at 11 a.m. today. The company raised $16 billion, which, in part, was used to buy back stock from employees and original investors. All of those in this group will record significant profits.
New technology offerings have often experienced large initial increases in their stock prices, as most have been hyped by promises of high growth and profitability. No other company in history has been hyped more than FB. So, the question is: Will FB be able to post revenue and profit growth that justifies such a healthy valuation?
By comparison, FB investors are paying $100.00 for each dollar of profit FB earned last year;Google investors paid $120.00 when it went public. NYSE companies have significantly lower price earnings multiples. FB posted $3.7 billion of revenue and $1 billion of profits last year.
The first day trading prices are an important event for a new IPO. At the height of the Internet bubble in 2000, the average technology stock rose 87 percent on its first day. The trading ranges for those companies were all over the lot since then. The NY Times has an excellent chart in the Business Section that shows the winners and losers three years after their IPOs. Google, Amazon, Yahoo, and eBay led the list with increases ranging from 398 to 3,590 percent.
Will FB stock perform in a similar manner? The answer is a resounding, "Who the hell knows?" The company has some distinct advantages including a financial statement with revenues and profits. Many companies during the Internet boom went public before they had revenues, much less profits. Also, FB has 900 million customers. It appears that a significant growth rate is still possible given that there are several billion people in the world who have not yet signed up for FB.
But there may be some potholes on the road to a higher stock price. First and foremost is FB's ability to generate growth that justifies its stock multiple (that would be 100 times at the moment). General Motors has become skeptical about the advertising advantages of using FB, and GM is one of the largest advertisers in the country. FB is a young company with many unproven executives, most notably its CEO. Do these men and women have the skills and fortitude to move FB forward at warp speed? Time will tell.
Facebook stock will be sold by many employees who will become very wealthy. The ones receiving the most money are the critical employees. Sometimes wealth dilutes a person's drive. Also, many of the earlier investors will be cashing out a large number of shares. This is always a red flag, although it is perfectly logical, honorable, and wise for them to do so. And finally, institutional investors who received large allocations in the IPO may dump the stock if it moves rapidly today causing some downward pressure. If the demand from people who want the stock is not great enough to soak up the shares being sold, the stock price will be pressured. This does not seem to be a great concern to the underwriters.
It would be fun to invest in FB, but do it carefully with an amount of money that you are comfortable with. FB is not a stock to buy now with all of your net worth, nor is any stock for that matter.
Should You Invest in Facebook? From PolicyMic Pundit Selma al-Samarrai: The $11.8 billion profit goal makes this IPO the biggest one ever by any internet company. Facebook’s growth since its creation in 2003 has been nothing short of outstanding, withrecent statistics showing that revenue rapidly increased from $777 million in 2009, to $3.7 billion in 2011, to over $1 billion in the first quarter of 2012 alone.
Facebook, so far a private company where users access the website entirely for free, accumulates85% of its profit from advertising, and the remaining 15% from social media games such as CityVille and FarmVille. Between January and September of 2011, Zynga reported a revenue of $828.9 million, bringing Facebook’s profit to a total of approximately $350 million. Even though the rate of growth in users and revenue that Facebook has experienced since its creation has been astoundingly fast, it has also slightly decelerated in the past few years, with a rate of growth of 154% between 2009 and 2010, followed by a growth of 88% between 2010 and 2011.
There are several factors involved that raise questions as to how worthwhile an investment in Facebook would be for interested buyers. These factors include Facebook’s slight revenue deceleration; its sole business model as a social media network, an identity that could quickly lose appeal in face of competition; the failure of Facebook, so far, to display advertisements on its mobile platform; an over-valued market worth; and what going public means for user satisfaction and privacy regulations.
Until recently, Zuckerberg made it clear that he intends to keep Facebook private and independent, especially by famously refusing Yahoo’s offer to purchase Facebook for approximately $1 billion in 2006, and then Microsoft’s offer for $15 billion. Zuckerberg has also always maintained that his primary concern for Facebook is user experience and satisfaction, with business interests seemingly a close second.
As Facebook goes public, with looming quarterly reviews, market regulations, public pressures and the oversight of the U.S. Securities Exchange and government, these priorities could very likely reverse. With an increase in the amount of share-holders and parties involved in the way that Facebook is regulated, privacy regulations – one of the most contentious issues within the website – could also become affected.
Facebook revolutionized social media by making it necessary for users to disclose their real names and identities, and where doing otherwise constitutes a violation of the company’s policy. This demand for authenticity from its users created a sense of community and introduced a personal touch to the website that fueled the growth that we see today. However, Facebook is a one-model business, to be a social networking website.
Facebook could very possibly be a fad that loses steam – as did fellow competitor Myspace, which up until 2008, continued to boast more users than Facebook.
Who Got Rich: Here's a quick list of who made what from Forbes, based on the assumption that underwriters exercise their entire over-allotment, plus the value of their remaining position (based on $38 price):
Mark Zuckerberg: $1.5 billion ($19.14 billion)
Dustin Moskovitz: $285 million ($4.8 billion remaining)
Peter Thiel: $848 million ($852m remaining)
Mark Pincus: $4.1 million ($158 million remaining)
Sean Parker: $38 million ($2.27 billion remaining)
Reid Hoffman: $412 million ($138 million remaining)
Jim Breyer: $125 million ($320 million remaining)
Accel Partners: $2 billion ($4.72 billion remaining)
DST Global: $2 billion ($3 billion remaining)
Goldman Sachs (GS): $1.25 billion ($1.25 billion remaining)
Greylock Partners: $332 million ($1.06 billion remaining)
Elevation Partners: $202 million ($1.32 billion remaining)
Mail.ru Group: $857 million ($1.28 billion remaining)
Meritech Capital Partners: $306 million ($1.23 billion remaining)
Microsoft Corp. (MSFT): $287 million ($959 million remaining)
Tiger Global Management: $1.03 billion ($1.02 billion remaining)