Bad execution of Facebook IPO:- This was also a reason for the share price decline of Facebook. In spite of the shares being overvalued Facebook had increased the number of shares by 25%.
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That may not sound like much, but on a $1 trillion dollar stock like Facebook, it works out to about a $30 billion decline in capitalization. (For context: Were Twitter to suffer a loss of that magnitude, its stock would be down nearly 60%!) Image source: Getty Images. What sent Facebook shares down so much?
According to a Reuters report last month, U.S. District Judge Robert Sweet in Manhattan said investors could pursue claims that Facebook should have disclosed prior to its May 2012 IPO internal estimates that increases in mobile use and product decisions could impact its future revenue.
This was considered a bad move when the shares were overvalued, and it led to forced selling from investors who were allotted more shares than they expected and when quick profits failed to materialize a couple of days after the IPO.
According to the experts, Facebook was Overvalued due to the actual ability of Facebook to generate money. Facebook generates around 80% of the yearly revenue by giving ads on its site. The remaining 20% of the revenue is generated from other sources.
The stock struggled to stay above the IPO price for most of the day, forcing underwriters to buy back shares to support the price. Only the aforementioned technical glitches and underwriter support prevented the stock price from falling below the IPO price on the first day of trading.
On the day of the trading, the stock opening was delayed due to technical glitches, as NASDAQ's electronic trading platform was unable to handle the high volume of trades.
Shares closed higher than $38 that first day, at $38.23, but plunged more than 10% the following day and failed to touch the IPO price again for more than a year.
Morgan Stanley led Facebook's IPO, in a coup over Wall Street rival Goldman Sachs, but the offering didn't go as planned. The company raised the price range headed into the offering, even as internal concerns were circulating about Facebook's outlook for the second quarter and full year.
Returning to our chewing of contemporary media reports, here's TechCrunch's coverage of Facebook's results just over 10 days following its IPO: “Facebook Has Lost About $35 Billion In Value Since IPO As Shares Dip Below $29.”
Before the IPO, Facebook was unable to show ads to mobile users. Facebook needed to find a solution before it threatened to cannibalize the company's advertising revenue.
Getting in at the beginning The stock was offered at $38 per share via the IPO. Let's assume you bought 132 shares for a total of $5,016 on May 18, 2012, and held all the way through to today. In the meantime, Facebook continued its incredible growth and has turned into a global juggernaut.
One reason: Microsoft's $247 million investment, which set Facebook's value at astronomical $15 billion, stipulated that Facebook would have to give Microsoft notice before it ever considered a buyout offer from Google – just about the only other company in the world that could pay so much for a tech startup with no ...
May 18, 2012Facebook (FB), now Meta, went public with its initial public offering (IPO) on May 18, 2012. The most popular social networking company had one of the largest and most anticipated IPOs in history.
Uber's IPO was one of the most highly anticipated of the year, and the company was valued as high as $120 billion by Wall Street investors. The company went public on May 9, 2019, but fell flat: Uber made history with the biggest first-day dollar loss in U.S. history.
In addition, Goldman Sachs sold $1.09 billion of Facebook stock it owned for itself and on behalf of its clients in the IPO. Facebook's stock has tumbled more than 15% from the IPO price in less than four trading days.