(NEW YORK) — After some technical hiccups, trading in Facebook’s blockbuster IPO officially opened to an eager public Friday at about $42.05 a share, but the price dropped below $40, lower than what many analysts expected.
Shares were virtually unchanged from the offer price at $38 at 11:51 a.m. eastern time, after rising 11 percent at the open.
Jim Krapfel, IPO analyst with investment firm, Morningstar, said he was surprised to see Facebook only up a few percentage points given the amount of pent up retail demand for its shares.
“Clearly concerns regarding the company’s valuation, increased insider selling, and GM news are weighing on the stock. Weakness in the stock market over the last several days is also likely playing a significant role,” he said.
General Motors said this week it was pulling about $10 million worth of advertising from Facebook.
But that didn’t stop Mark Zuckerberg, CEO and founder of Facebook, and COO Sheryl Sandberg from celebrating IPO day. The two executives gathered with a throng of cheering employees at the company headquarters in Menlo Park, Calif., to ring the Nasdaq’s opening bell at 9:30 a.m. eastern time ahead of the social media network’s long-awaited IPO.
Trading of the company’s shares, designated with the ticker symbol, “FB,” was scheduled to begin around 10:45 a.m. eastern time, but began almost an hour later because Facebook’s underwriter, Morgan Stanley, was reportedly having trouble changing orders.
With a large monitor and stage set up outdoors in “Hacker Square,” instead of visiting Nasdaq’s New York exchange, hundreds of employees gathered in the early hours of the morning in California. Many of them had participated in Facebook’s 31st “hackathon,” a company tradition described as an overnight sleepover that encourages employees to work on anything but their normal work duties.
Nasdaq’s CEO, Bob Greifeld, stood beaming next to Zuckerberg, 28, sans necktie, donning a t-shirt and clapping along with the other employees.
It was a long-awaited moment for the eight-year-old company that started in the Harvard University dormitory, Kirkland House.
Not to abandon Wall Street completely, Facebook CFO David Ebersman reportedly was at the Nasdaq in New York City during the opening bell. Instead of scrolling the usual stock prices of the day, Nasdaq’s digital billboard at its market center in Times Square this morning read, “Nasdaq Welcomes Facebook.”
On Thursday night, Facebook priced its initial public offering at $38 a share, raising $16 billion and valuing the company at $104 billion. The company said it made $3.7 billion in revenue in 2011.
The company is offering 421.2 million shares of common A-class stock, which includes 180 million new shares sold by the company and 241.2 million shares sold by existing shareholders, such as early employees.
The biggest IPO for a U.S. technology firm has gotten the attention of everyone from high school students to Wall Street professionals, many of whom are likely among the 900 million monthly users of the social media site.
Out of four recent technology IPOs — those of LinkedIn, Zynga, Pandora and Groupon — only LinkedIn has recently traded above its IPO price. LinkedIn’s IPO price last May was $45 a share. Shares of LinkedIn were trading down around 0.36 percent on Friday morning at $104.
While the IPO will make a number of billionaires out of early Facebook employees and investors, Facebook’s lead underwriter, the investment bank Morgan Stanley, will also come out a winner by the fees it will earn. The investment bank determined who got shares of the company before shares are sold to the larger public on Friday.
Krapfel said the media hype and investor buildup are to be expected, despite Facebook’s investment risks.
“It’s the most hotly anticipated IPO of all time,” Krapfel said. “Most of the U.S. population that uses the internet uses Facebook so there’s no surprise there would be a lot of interest in the IPO. Certainly with this much hype, there’s a lot of demand from investors.”
A trend of other high growth tech offerings show that “the more the stock goes up in the first day, the more it declines in the ensuing weeks and months,” he said.
Morningstar has valued the company at $32 a share but Krapfel said he expects the stock to trade into $50 and above.
Copyright 2012 ABC News Radio
Sam Turner, Deseret News
Robynn Garfield, KSL.com