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By Catholic Online (NEWS CONSORTIUM)

5/20/2012 (1 year ago)

Catholic Online (www.catholic.org)

Flood of sellers keeps the price close to the IPO.

Facebook founder Mark Zuckerberg rang the Nasdaq opening bell from company headquarters in Menlo Park, CA today, only to see the exchange run into immediate trouble. While the stock surged at the opening bell, sellers flooded the market and kept the price flat.

Zuckerberg may not be happy that the stock stayed flat, but his company still made $16 billion today.

Zuckerberg may not be happy that the stock stayed flat, but his company still made $16 billion today.

Article Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

5/20/2012 (1 year ago)

Published in Business & Economics

Keywords: Facebook, internet, IPO, Google, Nasdaq


NEW YORK, NY (Catholic Online) - The flurry of reports critical of Facebook's fundamentals has shied some traders away. Traditionally, initial public offerings (IPO) rise as enthusiastic investors go on a buying spree, but today many private stockholders decided to cash out keeping the price around $40. The stock was initially offered at $38.

Making matters worse, investors had to contend with a nearly three-hour wait for the stock to open because of the tremendous volume of trades coming in. The Nasdaq diligently worked its way through the flood of orders and by mid-day trades were running smoothly. 

Despite the flat first day of trading, Facebook still raised $16 billion which is the third largest IPO in US history. It is also the largest IPO ever for a tech company. 

While US stock indexes were up prior to the offering, they have not remained up. Currently, the Nasdaq is down by .62 percent. 

It is easy to imagine why Facebook has had a flat day despite the hype. First, financial data suggests that Facebook does not have the revenue stream to justify its asking price. And while the company is worth billions, it makes very little money off its users. And more importantly, advertisers are taking a second, hard look at Facebook to see if it's worth their money. Earlier this week GM, one of the nation's largest advertisers, said they would stop paying for ads on Facebook, which has also hurt the offering. 

Meanwhile, the market is open to speculators and short-term investments. Many traders purchased the stock only to turn around and flip it for a fast profit. At the same time this was happening, private shareholders also cashed in their stock, suggesting that few insiders believe the price of the stock will remain as high as it is today. 

The end result is a number of people will be losers, at least in the days to come, if the share price enters a prolonged decline. However, with Facebook adding $16 billion to its coffers, it is likely the company will find something lucrative to do with that money. 

Many have suggested that Facebook's next move will be a direct attack - with a search engine to rival Google. 

 

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