By Steve Johnson and Jeremy C. Owens, San Jose Mercury News –
SAN JOSE, Calif. — After opening at a price of $42.05, shares of Facebook’s wildly anticipated initial public offering closed at $38.37, near its pre-set price of $38.
But while that disappointed some experts, the most successful technology IPO in history set a record for the number of shares sold — 566 million — in a company’s stock market debut. The previous record was held by General Motors, with 458 million shares sold on its first day.
In the first 45 minutes that Facebook was trading, it accounted for a record 24 percent of trades executed by customers of TD Ameritrade, the online brokerage, according to the Associated Press. By comparison, on its first day back on the stock market, in November 2010, General Motors represented 7 percent of overall trades on TD Ameritrade. For the LinkedIn IPO, in May 2011, the figure was 5 percent.
The company’s feverishly-anticipated Wall Street debut — initially set for 8 a.m. — had been held up about 30 minutes after NasdaqOMX Group said it was “experiencing a delay” in opening shares of Facebook, according to Bloomberg. But with the stock now officially trading, investors could boost the company’s record $104 billion valuation even higher.
Barron’s reported that Facebook shares were being quoted at $45 on Nasdaq before trading began. And the Associated Press said Intrade, the online betting market, was predicting a 77 percent chance that the stock would close at $45.
But other social media stocks weren’t faring as well in the early going. Trading in Zynga was halted twice by a market circuit breaker due to volatile trading and its shares were down more than 12 percent by noon. By then, Groupon was down nearly 7 percent, while LinkedIn and Pandora had slumped about five percent. But Yelp was up nearly 9 percent.
Several social networking companies had seen their stocks dip Thursday, including LinkedIn, Jive and Yelp. Analysts said that may be a result of a broader market decline, although some suggested investors may be freeing up funds to buy Facebook instead.
Max Wolff, an analyst with Greencrest Capital in New York, said Facebook’s opening price of just $42 a share indicated surprisingly soft demand, given that the company’s shares had been trading for more than that in the secondary markets.
The fact that the stock struggled to gain altitude Friday morning, he said, reflected “a tug of war between institutional selling and retail buying, which always makes for volatility.”
Wolff, however, did not expect Facebook’s stock to dip below its opening price of $38 a share, saying that the underwriters and other big investors have put in place automated “buy” orders at that price.
He also was puzzled by the market’s treatment of Zynga, noting that at the $7.15-a-share range at which it was trading aroundmid-morning, its market cap of $5.74 billion represents far less than its contribution to Facebook’s revenues. According to its IPO filings, Facebook made 12 percent of its money last year from Zynga’s social games. So if the stock market has deemed Facebook to be worth $100 billion, Wolff said, its valuation of Zynga’s stock doesn’t compute.
Facebook cofounder and CEO Mark Zuckerberg rang the opening bell for the Nasdaq stock exchange a stage set up outside at the company’s Menlo Park headquarters at 6:30 a.m. Pacific time Friday, after employees spent all night coding in one of the company’s regular “hackathons.” Zuckerberg was joined on the stage by Chief Operating Officer Sheryl Sandberg and dozens of other employees.
As soon as Zuckerberg pushed the button to ring the bell, his Facebook page gained a status update that read “Mark listed FB on Nasdaq.” The company later revealed that a group of Facebook engineers “hacked” the Nasdaq bell mechanism to automatically trigger the update over a mobile phone connection. The update tagged Sandberg and four other Facebook executives.
While Zuckerberg celebrated the company’s IPO in Menlo Park, his sister Randi Zuckerberg was on the Nasdaq trading floor. The former Facebook employee posted a picture to her Facebook account from the Nasdaq floor, in which she was sitting next to CNN personality Ali Velshi.
Facebook completed its initial public offering Thursday, pricing the stock at $38 and selling 421 million shares, which raked in $16 billion at a record valuation for a U.S. company at IPO time. The world’s most popular social network is likely to sell an additional 63 million shares, known as an overallotment, to bring the total proceeds to $18.4 billion, the second highest total in history for a U.S. company.
Early interest in the new stock was so feverish that Facebook this week raised the potential range of its IPO price, which was originally listed as $28 to $35. At the final price of $38, most of the shares sold in the IPO went to institutional funds and other big clients of the IPO’s underwriters.
“Given the demand that they had, it doesn’t take a genius to predict the stock is likely to have a pretty good day,” said Sterne Agee analyst Arvind Bhatia. “How high does it go? It’s hard to tell.”
Facebook’s growth has fueled an explosion of smaller companies that build games and other applications for the site, but the success of the IPO is also likely to spur broader growth in the tech industry, according to Bruce Aust, an executive vice president at the Nasdaq exchange. Aust, who was at Facebook headquarters for the ceremony Friday morning, said 37 tech companies have filed regulatory documents to go public on the exchange in coming months.
“It definitely is a global phenomenon,” Aust said of Facebook. “I can understand the excitement around it, because it’s probably the Internet site I spend the most time on in my personal life. It’s part of daily life.”
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The frenzy for Facebook’s IPO began while engineers were hacking away in the wee hours of Friday morning, with several satellite and TV truck set up at the company’s Menlo Park campus just after midnight.
Around the grounds, thousands of cars, including luxury and specialty sports cars, filled the massive parking lot as private security guards patrolled the campus in pickup trucks. Employees could be seen inside the buildings working, eating and running on treadmills, with some working in roped-off sections of the parking lot under large flashlights.
Chefs were outside taking cigarette breaks while the kitchens were open behind them. Large luxury buses shuttled people to and from the headquarters’ entrance.
Outside the entrance, at least three Menlo Park police cruisers sat waiting in a parking lot.
Press and employee parking lots were full by 6 a.m. and there were 13 satellite trucks parked at the company’s headquarters, with three helicopters hovering overhead. By 6:45, after Zuckerberg had rung the bell that would presumably change all their lives for the richer, Facebook employees who had spent the night at a “hackathon,” killing time until the company’s big moment, began piling out of the campus. A steady stream of BMWs, Lexuses and Audis poured out of the employee lots, some headed for new homes on which, according to local Realtors, they reportedly had been putting cash down payments of $1 million or more.
Menlo Park Mayor Kirsten Keith arrived at 7:30, not in time for the bell ringing ceremony, but she did get to watch several newly-minted paper millionaires driving off the lot into her tax base. “We’re just excited to have them here,” said the mayor, following a hasty visit of about 10 minutes. She declined to say who she spoke to while she was inside.
The morning network news shows had gotten their money shots from the press parking lot, and they too began to disperse, with the three helicopters that had been hovering over the scene being the first to depart.
Zuckerberg was not the only person talking about Facebook’s IPO on the social network: Co-founder Eduardo Saverin, whose relationship with Zuckerberg was at the center of the Oscar-winning film “The Social Network,” congratulated his college classmate in a Facebook post that included a picture of an “About” page from the nascent social network in 2005.
“Congrats to everyone involved in the project from day one till today, and I especially wanted to congratulate Mark Zukerberg (sic) on keeping tremendous stead-fast focus, however hard that was, on making the world a more open and connected place,” Saverin wrote.
Zuckerberg still owns 503.6 million shares and options after the IPO, which are worth $19.1 billion at the IPO price. That wealth would make him the 29th richest person in the world, Bloomberg News reported Friday, just ahead of Google co-founders Larry Page and Sergey Brin.
