Yeah, this is the jist of it. As others have noted, serious investors aren’t going to give a shit what these idiots say, but it really seemed like CNN bent over backwards to trash this IPO (and, really, who gave a flying fuck to begin with?) and then played the bemused card when it didn’t blow like Peter North in an early resume padder.
As for me, I ain’t got no ire, nor care for The Facebook or Walls Street. I posted here cause I say fuck and goddammit alot. Really. This is how and talk and shit in real fucking life. And that wasn’t gonna fuckin’ play in no goddamn pansy-ass fuckin’ “Mundane Shit I Gotta Spout Cause I Ain’t Gotta Fuckin’ Hole Plug” forum. (MSIGSCIAGFHP)
No, not really. They already have the money they needed, but they also want some excitement associated with the offering. Most IPOs are priced about 10 to 15% low so that the initial investors are rewarded for taking the chance.
Facebook’s IPO was a failure yesterday. Watching the price bounce off $38 twice is a pretty strong indicator that the stock could drop further. Nobody who got in on the IPO was willing to take a loss yesterday, but next week will be a different story.
There are also stories about that the only reason it stayed at $38 was because the underwriter kept propping up the share price, and, in addition, Facebook reduced earnings guidance during the road show, which is never a good sign at any time, much less during the IPO road show.
Don’t worry. Monday they will probably announce something sensational like buying a small image-blurring technology company for $25 billion or new plans to share everyone’s home address to make the world a more open place, and the press coverage will drive the stock price way up.
Why would facebook care about the excitement? Let’s imagine for a moment that facebook did price things lower. They raised $16b, so the cost of getting that excitement would be $1.6b. Facebook made about $2b in profits in 2011, so is it worth giving up a half a year’s worth of profits for an excitement bump that lasts, what, a week or two of news cycles at best? I don’t see how that can be in facebook’s interest.
Ultimately, the stock is going to settle to a natural market price. The immediate aftermath of the IPO will have little effect on what that long-term price is.
The investment banks underwriting the IPO want a bounce so that they can hold out access to future IPOs as a carrot for loyal customers, and they want excitement and froth in the market because they make money when people trade.
Failure for whom? facebook apparently managed to extract the maximum value for the shares they sold. Sounds like I win for them. Again: this is bad for banks who want people to buy irrationally at every single IPO. Zuck figured out how to get almost all of the surplus from this sale. Good for him.
Stocks can always go up or down. The idea that someone who buys in at an IPO is guaranteed to make money in the first-day bump (and not just a little, but 10+% in a few hours) is bizarre to me. How could that possibly be sustainable in a relatively free and open market?
What’s the most important rule in business? Buy low, sell high.
What is an IPO? It is when the private owners of a company sell stock in the company to the general public.
Why would the owners of a company want to sell? Either the company itself needs more money and the money will go to help the business grow, or the money will go to the owners.
In both cases, why would the owners want to sell stock in the company at a discount? They want to sell for as high a price as possible. Selling at a 10% discount, so they can have the satisfaction of seeing the stock price rise 10% the week after the IPO doesn’t make any sense, unless that quiet glow of satisfaction is worth a billion dollars. Me, I’d rather have the billion dollars.
The IPO price is not set by the owners of the company unilaterally. The underwriter has a LOT of say in the IPO price and THEY want the IPO priced to sell.
And I’ve read that one of the problems is that there was not as much demand as they expected. The day of the IPO, the bank which was the underwriter spent a lot of money buying up shares at $38, and has taken a bath. Don’t cry for them, they got a ton of fees.
Well, it seems the bank that set up the IPO and the initial secret club investors got screwed. Sucks to be them. Nice for Facebook though, since they sold a bunch of shares at an inflated value.
It’s because they’re not selling all their stock. A bad IPO can have a very bad effect on the price of the stock. I believe they were reporting that Zuckerberg lost $2.5 billion since the IPO, which is actually not that much for him.
