Many are claiming the Facebook IPO was a failure, but the company went public at $38 a share and settled down slightly above the IPO price. The next day, Facebook slumped to $34 a share.
The early price action is largely due to it being an over-anticipated and over-hyped product, glitches in NASDAQ software opening day, and a last minute price that frightened some professional investors.
That doesn’t necessarily mean that the IPO is a failure or that it will be a fruitless investment for the future.
It would be asinine to label an IPO as a failure because it failed to pop, or rise substantially, on the first day to give those who got in on the IPO a quick profit. Investing is a turtle race. Where the company trades in the next six months really doesn’t matter.
As market forces start to work on the capital structure of the company, the price will inevitably change. The real success of the IPO will be determined four years down the line.
It’s unfair to even call the launch a failure. The success of a launch is not determined by how much money investment bankers make.
It is determined by the relative closeness between the offering price and where the stock actually trades.
The closing price of $34 being fairly close to the offering price of $38 shows investors believed it was fair. That’s pretty remarkable considering all the hype over the company.
If you look at most new advertisements today, you’ll see most of them give their Facebook page instead of their web page. Even GM, who pulled $10 million in advertising from the company, has yet to pull their Facebook page.
That’s indicative of market power. Take a look at Facebook’s competition and you’ll see that it’s virtually non-existent.
With over 900,000,000 members and $105 billion in assets, it’s clear that the company is not going anywhere as long as they continue to adapt to new technologies and listen to their customers to see where the market is going.