Did Facebook Stock Get a Boost From its Friends?
Facebook (NASDAQ:FB) may have been one of the most-watched stocks of the day, but the public trading newbie certainly wasn’t the hottest. The offering price of Facebook stock had been set at $38 and shares opened 11 percent higher, but ended the day up just 23 cents or 0.6 percent. In fact, throughout the day, it was the company’s underwriters who were reportedly working hard to ensure the stock didn’t fall below its base offering price.
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Companies and banks working on taking it public have to hope for a big opening day rise to increase investor enthusiasm. So every time Facebook shares hit $38, millions of bids appeared, keeping the stock above water. “The investment bankers came in; they had to jump in and buy the stock,” Gary Kaltbaum of Kaltbaum Capital Management told USA Today. “They couldn’t have such a hyped IPO come down below the offering price.”
More than 30 brokerages and banks were involved in the offering and nearly 571 million shares were exchanged on Friday—a record for a stock debut. The previous record was the November 2010 debut of General Motors.
Even though Facebook shares opened at around $42, they fell to $38 within the first half hour. By mid-afternoon they had climbed back up to about $41.06, but the rise couldn’t sustain itself until the end of the trading day.
Some experts say technical glitches may have resulted in some panicked selling, too. The debut was first delayed by 30 minutes and then there were reports during the day that some trade execution messages had been delayed. Other Internet stocks were affected by the glitches and the mellow Facebook stock, with Zynga (NASDAQ:ZNGA) closing down 13.4 percent, Groupon (NASDAQ:GRPN) ending down 6.7 percent, and LinkedIn (NYSE:LNKD) falling 5.9 percent.
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