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The share price of newly debuted Facebook stock is seen at the Nasdaq stock market moments after it went public on May 18, 2012. The highly touted IPO for the social network fizzled after some early froth.
Well, that was a disaster. Facebook closed its first day of trading at just above its offering price of $38 per share. Mark Zukerberg did say that it wasn't Facebook's mission to be a public company, after all, and it looks like he got his wish to at least have it not be the company that brought the Everyday Joe, retail investor back into the market.
Two new subplots. First, you can't believe how tense it was to watch the market close, as Facebook got precariously close to "breaking the IPO" by dipping below $38. That would have been a debacle for Morgan Stanley, the lead underwriter in the offering. My Twitter feed was on fire for the last half hour of trading with tweets about how Morgan was waging an "epic battle" to hold that $38 line (@TheStalwart and @carney — Joe Weisenthal of Business Insider and John Carney of CNBC, respectively, were all over it). Who knows how much money they spent to buy shares, on trading volume that hit 460 million in a single session, a new record.
A good old-fashioned stock certificate, for a company that's anything but.
Facebook finally began trading this morning on the NASDAQ exchange, after some technical glitches prevented the social network from testing its $104-billion market cap and $38 IPO price at 11 a.m. Wall Street Time, as anticipated. The party had to wait until 11:30.
The basic story has two parts. First, there was no big first-day pop — at least not yet, and with just a few hours of trading left on the East Coast, there's every chance that sell orders will be executed late in the day that will push Facebook down to near its IPO price. It won't fall below $38 because Morgan Stanley and the syndicate of investment banks that ran the IPO will provide support at that level.
The stock opened at $42.50, for a reasonable if unspectacular pop, around 13 percent. By contrast, LinkedIn popped 109 percent when it began trading in May of 2011. That performance prompted some market observers to get very, very angry.
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The Facebook website is displayed on a laptop computer. The company's $16-billion IPO was led by a California kid who grew up anything but rich.
Talk about a local boy done good! Facebook will begin trading shares tomorrow. The IPO values the company at $104 b-b-billion, which is a mere $4 billion more than many were expecting. The lead underwriter on the deal, Morgan Stanley, has now led most of the big tech IPOs of the past year or so and stands to make around $40 million on the deal. Which doesn't sound like much. But still...
(Think of the lead underwriter as a sort of head financial guide, making it possible for a company to transition from a private to a public existence.)
And whom do we have to thank for all this banking magic? None other than L.A.'s own Michael Grimes. This is from a DealBook profile of Grimes, 46, which appeared a few days back:
From an early age, Mr. Grimes seemed headed for a career in technology. Growing up in East Los Angeles in a modest two-bedroom house with his sister and parents, Mr. Grimes attended the Polytechnic School, a prestigious prep school in Pasadena, Calif. His father, David Grimes, the owner of a mapping and land-surveying business, worked Saturdays to afford his son’s $5,000-a-year tuition.
At the age of 12, Mr. Grimes asked his father for the latest Apple computer, a $2,500 machine that many of his wealthier friends owned. His father made a deal with him. He would buy the machine if his son converted some computer programs his father had developed into Apple’s programming language.
“He did it in one summer,” said David Grimes. “I guess I pushed him in that direction.”
At last. At last.
It's official. Facebook is now FB on the NASDAQ. The great, heaving social network, started by Mark Zuckerberg (and a few others) in a Harvard dorm room less than a decade ago, will float 422 million shares and begin trading tomorrow.
Humanity rejoices! But life just got much tougher for Zuck & Co., who will now be reporting to Wall Street every three months.
So...will you be buying?
As regular readers of the DeBord Report know, perhaps all too well, I think that Facebook has achieved its astonishing valuation and prospects for a $100-billion-plus IPO tomorrow on the backs of the free labor of nearly a billion users.
You post updates. You post links. You post pictures and videos. You do this in the teeming millions. Other people react to and share your activities. Facebook transforms all of this into about $3 billion per quarter in advertising revenue.
And that's just on the website. We haven't even gotten into the mobile bonanza that awaits for Zuck & Co.
Tomorrow, they stage an IPO that will instantly mint many, many Facebook millionaires, eventually chop a decent chunk off California's approximately $16 billion budget deficit and make Zuck one of the richest men in all the land.