Looks like the Facebook IPO has fizzled out like that North Korean rocket launch.
The stock barely managed to hold above its initial public offering price of $38 on its first day of trading on Friday, and it took all the powers and skills of its Wall Street underwriters to avoid that embarrassment. On Monday, in the absence of Wall Street’s crutch, the stock has collapsed 11 percent, to $34.
But even in that North Korean rocket launch there were winners as well as losers. Much of humanity, for example, can be glad that North Korea can’t launch a missile higher than Kim Jong Un’s forehead. And there were winners in the Facebook IPO. A lot of losers. But some winners.
Early Investors: Venture-capital firms and hedge funds like Digital Sky Technologies and Tiger Global Management got into Facebook early and walked off with very large chunks of the $16 billion the company raised on Friday. The fact that the stock price has fallen since they cashed out has no effect on them.
In fact, this is possibly one big difference between the current tech bubble and the last — in the late 1990s, a company like Facebook might have gone public at a much earlier stage, giving retail investors a better chance to make money. Now, these companies are coming to market at a much more mature stage, writes Daniel Fisher at Forbes, giving early investors a much bigger edge.
Mark Zuckerberg: He got married, and he made billions, just like Facebook’s other early investors, corporate officers and mural painters. He’s crying about his stock price all the way to his honeymoon on Money Island.
The Lesser Fools: While we’re all focusing on the fact that Facebook’s stock price is crumbling, keep in mind that somebody somewhere has a swollen hand from the high-fives he or she has been getting because they managed to dump the stock on some other poor slob while the price was still above water. We could call these people the Lesser Fools, meaning they found greater fools to buy Facebook stock anywhere from $38 to $45 on Friday.
The Underwriters: It looks like pumping up the size and price of the IPO in the days ahead of the offering was not such a great idea, particularly with a spate of badly timed news, like General Motors pulling its ads. On the plus side, lead underwriter Morgan Stanley did gamely help keep the stock price above $38 on Friday. But it would have been an even bigger public-relations fiasco for Wall Street if they had not done so and let the stock tumble instead.
Nasdaq: The stock exchange wrested Facebook’s prized IPO listing away from its rival, the New York Stock Exchange, and then fumbled it. Trading was delayed, and then many trades disappeared into a black hole. This is not how you win the argument in favor of future stock listings. A subsidiary loser in this case is computerized, high-frequency trading. We have no idea if the few remaining human beings at the NYSE would have handled this any better, but for now it’s a dark day for the machines.
Other Social Media Stocks: It’s been an ugly couple of days for shares of Zynga and LinkedIn, which suffered sympathy collapses on Friday and continued to lose ground on Monday. Groupon, Yelp and Pandora also fell on Friday, but managed to rebound on Monday.
The Greater Fools: Things were looking good for Facebook’s stock price early on Friday: It opened at $42 and went as high as $45. Here’s hoping some of those buyers were able to get out immediately, putting themselves in the Lesser Fools camp. Otherwise they may be in for a long, long wait to get back to break-even (the stock was recently at about $34). Even if you managed to buy at the $38 IPO price, you’re still down 11 percent since Friday. And overall the company has lost some $10 billion in market value since Friday, according to research firm PrivCap. They think the stock is worth $25. If they’re right, there will be more big losses, and big losers still to come.