Facebook had its IPO last Friday and its first public appearance on Nasdaq has surely not been great. The social network’s IPO was very hyped and the week that led up to the IPO had every website talking about the IPO, with many analysts predicting it to be the most historic IPO and others, who also had the same opinion. However, on Friday, when Facebook went public, it disappointed and the current forecast for the shares of the social network don’t look good either.
From its initial IPO price, Facebook’s stock has dropped by 16 percent, which has led for many to call Facebook’s IPO as the worst big IPO in the last decade based upon the first 5 days in which it’s shared have traded.
Facebook’s IPO is one of the biggest flops of the decade and Bloomberg and others have labeled Facebook’s historic IPO as the worst IPO. Sheila Dharmarajan, a markets reporter, discussed Facebook’s IPO in a comparison with other poor IPOs that have gone down in history including Mastercard, Blackstone Group, MF Global and General Motors. MF Global filed the 8th biggest bankruptcy in the history of United States in 2011. Facebook’s comparison with companies who had the worst IPO’s shows how big of a flop Facebook’s IPO was, says Sheila.
Many have pointed out the reasons for Facebook’s dismal IPO performance, one of which is the fact that the lead underwriter of the company’s shares, Morgan Stanley forced the company to increase its share offering by 25%. This lead to a decline in Facebook’s share value even before the trading started.
Moreover, Facebook also decided to increase the introductory price of its shares before the IPO. There were other problems such as the IPO being delayed due to problems in Nasdaq’s software. The delay for nearly 30 minutes affected the shares adversely, as a lot of brokers didn’t get confirmation about whether their share orders were received and were being processed or not.
Another problem was that Morgan Stanley dropped their estimates for the stock price between the middle of the stock offering. This, some say, also had an adverse impact as the news went up to high level investors, making them doubt the company’s shares potential.