Facebook - what happened?

[Wildman]

OK - So, I'll preface this post by saying that I am a newbie to spread betting, so please bear this in mind when replying.

My question is simple, what happened with the FB stock today? Everything I read indicated that supply way outstripped demand and the majority of projections were for a massive rise in stock price.

On the negative side, there was the (I'm guessing premeditated in the timing of it's announcement) law suit relating to user tracking.

But, even taking that into account, for the share's to finish just a few cents up on opening is really not what I expected.

Could anyone please enlighten me as to what happened? And what I should be looking out for in situations like this?

 

[Ross Spur]

OK - So, I'll preface this post by saying that I am a newbie to spread betting, so please bear this in mind when replying.

My question is simple, what happened with the FB stock today? Everything I read indicated that supply way outstripped demand and the majority of projections were for a massive rise in stock price.

On the negative side, there was the (I'm guessing premeditated in the timing of it's announcement) law suit relating to user tracking.

But, even taking that into account, for the share's to finish just a few cents up on opening is really not what I expected.

Could anyone please enlighten me as to what happened? And what I should be looking out for in situations like this?

The off switch, or a therapist, but mainly a less volatile market to trade.

 

[wackypete2]

Simple. Large, over-hyped IPO's are extremely volatile and unpredictable. Those who got in at the open between $42-$43 hoping to sell at $!!!! before the end of the day were duped. The drop at the end of the day were these people all getting out at a loss while cursing the market.

Other issues that affected today's price:
1- Nasdaq technical issues where traders' orders were never confirmed. Most of those traders backed away from further participation because they didn't know what they had.
2- Plenty of shares to meet the high demand. Twice in the past 2 weeks the #shares to be made available on opening day was increased.
3- Overall cr@ppy market sentiment this entire week. Indexes were down, traders were dumping stocks all week.

How to avoid getting jacked on future IPO's? Easy. AVOID them. It's gambling. period.

Peter

 

[gain247]

Yeah, wackypete2 hits on the nail. It was IPO lottery going on, again, for a long, long time (remember 1999, folks?). Players got a bit burned of the high(er than expected) amount of FB shares they surpsiringly got when bidding, then some problems with order flow process (trades were confirmed by Nasdaq only about 2 hours after the fact) so too high stakes with uncertain execution caused the steam blow off. So not real trading, not even to mention 'investing' LOL, just betting on hot IPO odds, pretty much as wackypete2 explained.

 

[TheBramble]

Everything I read indicated that supply way outstripped demand and the majority of projections were for a massive rise in stock price.

You don't often see that cuase and effect in the same sentence. You'll have to tell me how that one works.

My question is simple, what happened with the FB stock today?

FB currently has around 900 million users each currently ‘earning’ FB $5 per year. That’s $4.5 billion gross per year. It’s ‘valued’ at $104 billion. Its rate of membership subscriptions is falling. At best it can only realistically expect to make a maximum $17 per user per year and that’s based on an extremely attractive (and unrealistically absurd) mobile app advertising pricing & utilisation levels.

Price and supply were both hiked twice in the run up. Given the blatantly over-hyped data the underwriters did a good job to keep it above the $38 float price as supply was well above demand. There are only so many mugs, especially in current economic climate.

Only 420 million ’A’ shares were available to market (20% of the total) and with a churn of just 570 million you can calculate roughly how many shares ended up in public hands at close of trading. As I said yesterday, reality doesn’t necessarily have to kick in immediately and there will I am guessing attempts to ramp it up while they try and off-load the un-sold stock in order attain whatever average price they’ve set, or better.

Watch out for a mass dump when the IPO legal holding period expires and if you’re good for it, even short into it. They’ll be plenty to borrow…

 

[Ross Spur]

As I said yesterday, reality doesn’t necessarily have to kick in immediately and there will I am guessing attempts to ramp it up while they try and off-load the un-sold stock in order attain whatever average price they’ve set, or better.

Watch out for a mass dump when the IPO legal holding period expires and if you’re good for it, even short into it. They’ll be plenty to borrow…

When does it become officially short-able?

 

[TheBramble]

When does it become officially short-able?

Not my market, but I guess initial expectations would be that stock should become available for shorting by the great unwashed after initial settlement , but this will depend upon who successful the launch was deemed to be. I do know the more ‘current’ hedgies do have access to FB stock to short, but with a stock like this which is so out of whack with standard market valuation they’ll not be too keen to get in until after the smoke clears. Plus this is predominantly a retail investor launch, not a professional one and therefore less ability and willingness to lend to short.

 

[TheBramble]

When does it become officially short-able?

Just realised you may have been referring to my last sentence. I was talking about lock-up, not stock available to lend for shorting. I’m fairly certain there is a lock-up period to prevent pre-IPO stock holders unloading within 6 months of the IPO.

 

[Ross Spur]

Just realised you may have been referring to my last sentence. I was talking about lock-up, not stock available to lend for shorting. I’m fairly certain there is a lock-up period to prevent pre-IPO stock holders unloading within 6 months of the IPO.

OK, thanks. It'll be interesting to see what happens, but no doubt a spike up will be contrived at some stage.

 

[Patricia12]

I hope this post may little bit help you. Glitches mar Facebook stock debut - The Washington Post