Where Will Facebook’s Stock Trade Today?
Shares opened at $42 per share according to the Nasdaq. Facebook is one of the most feverishly anticipated debuts on Wall Street in a long time. Facebook (NASDAQ:FB) opens for trading today after raising a monstrous $16 billion in its IPO, selling 421.2 million shares at $38 each on Thursday.
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With a market cap of $104 billion, Facebook is the single most visible example of the power and reach of technology and the capacity of a dorm room start-up to achieve wealth beyond that of many a small country. At this valuation, Facebook dwarfs a combined Starbucks (NASDAQ:SBUX) and Hewlett-Packard (NYSE:HPQ) and, assuming it trades at the IPO price of $38, its price to earnings ratio would be over 100 — compare that to Apple’s (NASDAQ:AAPL) 14 and Google’s (NASDAQ:GOOG) 19.
Facebook is expected to start trading today around 11 a.m., after its youthful founder and Chief Executive, 28-year-old Mark Zuckerberg, rings a bell at his headquarters in Menlo Park, California.
Where could shares trade today?
There’s no denying the hype, given the massive publicity the IPO received, and the highly anticipated trickle-down effect of the billions of dollars of new wealth on prices of anything from real estate in San Francisco to automobiles.
“A 15 to 20 percent pop is in the realm of possibility,” said Tim Loughran, a finance professor at the University of Notre Dame. “Given they already moved their IPO range up and increased the size, that’s bullish to begin with.” Morningstar analysts projected today’s closing price to be about $50.
However, the doubters point to some sobering factors about Facebook going forward. Firstly, Facebook’s once relentless rate of revenue growth has been slowing in recent months. Online advertising has been the mainstay here, and concerns were compounded this week by General Motors’ (NYSE:GM) announcement Tuesday that it would cease to advertise on Facebook.
Second, clarity is still awaited on exactly how Facebook plans to monetize the growing use of mobile devices opposite desktops. The company has received a lot of criticism for its mobile app.
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