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After a white-knuckle final 20 minutes of the day, shares of Facebook managed to just keep one nostril above $38, the level where the IPO priced last night.
Why did it never fall below $38?
Basically, because the underwriters of the IPO (Morgan Stanley, et al) bid heavily right at $38 to make sure there was no chance that selling pressure would drive the stock lower than that level. It would be an embarrassment if their clients lost money on their first day of the IPO.
The below table gives a good look at what’s going on.
On the left side, you see the “bids” that are in the market for the stock. Those are the offers to buy. On the right you see the “asks”, which are asking prices by sellers.
Note that next to each bid or ask there’s a “size” which is the size of the offer to buy or sell.
Note two things: At the top of the left column, you see lots of bids at $38.00 on various trading platforms. (The BATS exchange, Arca, etc.). What’s more, the size of those bids are HUGE.
Hundreds of thousands of shares compared to relatively tiny asks and bids everywhere else. So basically, there were really big, honkin’ buyers ready to stand and protect $38, no matter what.
(Thanks to Twitterer @bourbon_meyer for the chart)
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HOUSE OF CARDS :-(
I watched this live and i think its fair to say most of the pundits on Bloomberg and CNBC were not terribly inspired at the floatation and indeed the price. There may be a few rich people initially but I think its a safe bet some tears will be flowing in the near future. Complete madness of a valuation!
I was watching the whole thing live aswell. My favorite line of the day was when one of the reporters at Facebook HQ was asked, “how do they feel about the shareprice over at Facebook?”. The reporter replied, ” i don’t think they care. They’ve made their money.”
Bubble
So neither bear nor bull Mondays opening will be interesting !
this ‘facebook bubble’ theory has become too popular. isnt it a possibility that facebook may well survive and indeed thrive. possibly……..
Nope, not with a P/E of 88, most companies in good shape are 10 to 20
So it seems all the warnings being given by people on here have been bang on.
€100 billion for a firm that has no real assets, just relying on advertising at a time when the world economy is very down. There has been some talk about how they would make extra revenue, such as charging for additional services like ‘cloud storage’. The vast majority of people don’t have a huge need for storage over 5G.
So it seems very few buyers are coming on board at that price. The investors may not get their return just yet.
I suspect quite a few people are going to get stung here, I recall AOL was valued at $150 billion at one time, Today, less than a $1 Billion and this is a company with physical assets, remember Myspace? purchased by Mongral Murdch for $600 million dollars only to be sold on a few years later for $32 million. Just astonishes me how some people don’t learn. At best Facebook is worth the same as Google at worst, half that.
em Joey, Google has a market cap of $196b…
Is Fianna Fail running/managing Facebook?
Im just puzzled, if its worth that money NOW, what can actually improve its value further?
Facebook would argue that with around 1 billion subscribers they should be able to better monetize this. And they should. But to date this hasn’t happened. Google have a click through rate on their ads of about 5% depending on who u listen to but Facebook is about 0.05%. So if they can crack that nut it’s worth valuation. If not it’s a lame duck. But either way I see no upside to $38. The potential has been well and truly built into the price
Yeah… That would have been embarrassing the Facebook IPO fizzling out as many predicted…
Seems like banks were intentionality trying to inflate a bubble, flip the stock and let it burst, screwing the small time investor that bought on the secondary market… But people are smarter this time round
I don’t believe the underwriters spent hundreds of millions of dollars propping up the price just to save themselves and their clients embarrassment. They did it because they were contractually obliged on the first day of trading to support the market price at the IPO price of $38. After the first day they have no such obligation. Monday should be interesting…
Monday=Pop go d Facebook share price!!! Watch…..
Huge amount of information on their database. Birthdays, relationship histories, education info, political views, employment histories, friend and family photos, location (via check in), likes and now pre-facebook info via timeline. They may not have much in the way of assets, but with the personal info of 800 million users, there may be much wrestling for control of this company in the future.
You only have to look at the phone maker Nokia and its fortunes to see how these companies can be a risky investment. They have lost out to Samsung and Apple where once upon a time nearly everyone had a Nokia. Nokia have been losing huge amounts of money. Of course you can make huge money as well. Bono and his Elevation partners invested in a number of other start ups, with the hope that one of them would make them a lot of money.
I’d love to know how many shares were actually bought and whether these investors have managed in some way to unload their shares onto other buyers. Were many shares offered at under $38 in order to force a sale.
opinons should not always be aired.
There may be but do people want to be bombarded with ads and pop-ups coming up on their facebook page? Will we see people having to view a short video advertisement before people can view their timeline? Already happening on many video playback sites. That would certainly attract revenue given the amount of people online. All of these could add value but will people be willing to put up with it and will they spend less time online? What is to stop people moving to the next facebook just like happened with Bebo.
One thing they do they need is for the economy and advertising revenue to pick up. That doesn’t look like it is going to happen within the next couple of years given the poor global economic situation.
Better off buying Linkedin!!
Speculation can improve its value just like the property boom in Ireland and the efforts by Providence in looking for investing to fund their search for oil. Unless there is substance behind it or to come it will fall flat on its face.
At least the price of oil looks like it will continue to increase.
As I thought, FB seem to have real issues with monetising all the lovely marketing info they hold. Of course the very nature of the site means that the have to balance monetizing with privacy issues. Should they go down the pop up advertising route it would not be long before people began migrating to an alternative ad free service. Making real money out of FB in the future will be challenging to say the least. Their track record is not good up to now. Some stags may have made something on early trading but a fall in share price on Monday is likely as institutional investors stay away. Ultimately FB’s value is based on it’s membership so question one is, how many more members can they get? Given that we are already seeing a slowdown in that area they may soon be approaching saturation point. All in all a day traders gamble at best.
Pop
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