NASDAQ Marketsite in Times Square at 11:30am Friday morning as international media and an enthralled crowd watches as Facebook stock opens for its first trade. Photo Credit: PrivCo
May 18, 2012 4:10pm EST – Facebook (NASDAQ: FB) (PrivCo Ticker: FACEP) closed its first day as a publicly traded company at a disappointing $38.23, a 0.61% increase from its $38 IPO price and 9.1% decline from where the stock opened at $42.05.
PrivCo’s key takeaways from Facebook’s IPO day:
- A prospective opening price of $45 prompted a surge in sell orders which lowered the actual opening price to $42.05 and delayed trades.
- Facebook’s initial trades occurred just after 11:30am EST at $42.05 after a 30 minute delay.
- Immediately upon trading, Facebook’s price spiked 13.2% above the IPO price to its intraday high of $43.
- As Facebook’s price began to dip, two underwriters including Morgan Stanley were forced to offer a stabilizing bid of $38 to prevent Facebook from falling below its IPO price.
- Stabilizing bids from underwriters are a normal contractual agreement though rarely utilized, unless absolutely necessary. (During Zynga’s IPO, which went public at $10/share, underwriters stepped in with supporting bids at $9/share and were the only reason the stock closed just above $9 on the first day.)
- Because of the offering's size ($18 billion), Facebook's underwriters have extremely limited ability to support the stock using stabilizing bids.
- PrivCo research shows that without underwriter support, Facebook would be trading below the $38 IPO price.
- Investors sold shares of social media investments such as Zynga, Pandora, and Groupon in order to “sell” below the protected $38 by proxy. A massive Zynga short position caused the stock to fall 14% in two minutes prompting a suspension of trading.
“The market was very surprised that the Facebook pop was so tepid today. The very presence of a supporting bid augurs poorly for Facebook stock, indicating the "pent up demand" was mostly wiped out when Facebook increased the IPO size by 25% in the last 2 days,” said PrivCo CEO and Founder Sam Hamadeh from the NASDAQ marketsite earlier today.