14 DAY TRIAL // Facebook's IPO will go down in history, but as one of the messiest ever. It's not the disaster that many are portraying it to be, but there are several things that could have gone a lot better. The most obvious one is the fact that share price fell considerably from the opening price and has only now stabilized.
Though, considering the latest developments, that may not be for long. But the share price fumbling isn't a sign of weakening fate in Facebook as it is a sign of a botched IPO.
Botched from the perspective are the investors that bought Facebook stock on day one, though even that may be an exaggeration.
The only investors that are concerned or even furious over Facebook share price going down are those expecting to make a quick buck fast, from a first day pop.
When that didn't happen, people got cross, but Facebook share price will go up eventually and anyone investing now should have done it for the long term.
In any case, from the perspective of the bankers, previous Facebook investors and Facebook itself, the IPO was a grand success since everyone made money, a lot of money.
Still, people are angry and they seem to have a couple of reasons for it. For one, it seems that in the days leading up to the IPO, Facebook revealed that it may be making less money than it anticipated since more and more people are using the mobile apps or websites, where Facebook doesn't run ads.
But Facebook only told the bankers handling the IPO this which, in turn, only told some favored potential investors. The end result was that, on the day of the IPO, but big institutional investors, the ones that make big transactions, were weary of buying Facebook stock.
Everyone else, including "retail" investors, meaning regular people, was expecting Facebook stock to do well or even "pop" so they bought it at the initial price. But when the demand just wasn't there, since the institutional investors weren't buying, everyone panicked and share price went down.
Banks had to intervene to keep the price above the initial level in the first day, and they may have made quite a lot of money out of this as well. But share price went down after that, nonetheless.
The fact that NASDAQ, where Facebook choose to trade, experienced significant issues on the first day leading to some potentially erroneous transactions, or at least misinformed ones. Morgan Stanley is actually reviewing all initial transactions to check for problems.
Investors left in the dark are not pleased and are blaming Facebook and the banks of withholding information. Already, several have sued the company and the banks and other lawsuits are pending. The US Securities and Exchange Commission is investigating the matter and it's not the only agency to do so.
Even if nothing comes out of this, Facebook's reputation will be hurt. The banks' reputation as well, but it wasn't like people trusted banks that much before this. NASDAQ may also suffer as there is already talk of Facebook talking to NYSE to move transactions there.