Bloomberg News

Facebook Fails to Make Day-One Pop, Lags Behind Google

May 19, 2012

Facebook page on a mobile phone. Photographer: Mahesh A. Kumar/AP Photo

Facebook page on a mobile phone. Photographer: Mahesh A. Kumar/AP Photo

Facebook Inc.’s (FB:US) stock market debut was anything but celebratory.

The 8-year-old social-networking site run by co-founder Mark Zuckerberg closed 0.6 percent higher at $38.23 in New York yesterday. That compares with Carlyle Group LP (CG:US)’s lackluster 0.2 percent day-one increase on May 3. It pales in contrast with Google Inc. (GOOG:US)’s 18 percent jump in its 2004 initial public offering, Visa Inc. (V:US)’s 28 percent gain in 2008 and LinkedIn Corp.’s 109 percent surge last May.

Facebook raised $16 billion in the largest IPO on record for a technology company. The offering valued Facebook at $104 billion, making it the seventh-biggest U.S. technology company by stock market valuation. Yet by sales Facebook doesn’t crack the top 50, leaving some investors concerned about the stock’s ability to increase from here.

“I’m a skeptic when it comes to Facebook,” said Eric Jackson, founder of Ironfire Capital LLC. “IPOs in general are extremely volatile and it’s very difficult to handicap.”

Initial trading in the stock yesterday took a half-hour longer than Nasdaq OMX Group Inc.’s forecast. About 40 minutes later, the second-largest U.S. equities exchange operator said it was investigating an issue in reporting trades from the opening auction back to the brokerages that made them. Nasdaq later said it delivered the messages.

SEC Review

The U.S. Securities and Exchange Commission will review the incident, John Nester, an SEC spokesman, said in an e-mailed statement yesterday.

Facebook was the 11th U.S. consumer Internet company to go public in the past year, a stretch that began with LinkedIn a year ago. With a valuation of $104.8 billion at yesterday’s close, Facebook is worth more than three times the other 10 combined. LinkedIn is second, valued at $10.3 billion.

While on a percentage basis, Facebook’s first-day gain was less dramatic than most, it added close to $1 billion in value because of its size. For every dollar that Facebook’s stock gains, the company’s value rises by $2.74 billion.

“The scale of this thing is monstrous,” said Francis Gaskins, president of researcher IPOdesktop.com in Marina Del Rey, California. “Nothing like this has ever happened before and it’s never going to happen again. You just can’t compare it.”

Facebook, based in Menlo Park, California, is already bigger by value than companies including Cisco Systems Inc. and Qualcomm Inc. (QCOM:US)

Here’s a snapshot of how other landmark IPOs performed in their debuts (in alphabetical order):

Carlyle Group LP began trading on May 3 at $22 and rose 0.2 percent to $22.05, after earlier advancing as much as 2.1 percent to $22.45. The IPO valued the second-largest private- equity firm at $6.7 billion.

General Motors Co. (GM:US) emerged from bankruptcy and went public in November 2010, raising more than $20 billion. The Detroit- based automaker climbed as much as 9.1 percent in its first day of trading on Nov. 18, only to close up 3.6 percent $34.19.

Google Inc., the world’s biggest search engine, jumped 18 percent to $100.34 in its debut on Aug. 19, 2004. The Mountain View, California-based company finished the day with a $27.2 billion valuation. It’s since multiplied more than sevenfold to $195.6 billion.

Groupon Inc. (GRPN:US), the biggest daily-deal coupon site, began trading on Nov. 4 at $20 and surged 31 percent to $26.11 in its first day, after earlier advancing 56 percent to $31.14. Groupon, based in Chicago, was valued at $12.7 billion in the IPO and has since tumbled 42 percent to $7.5 billion.

LinkedIn Corp. began trading on May 19, 2011, and more than doubled to $94.25 from $45, adding $4.66 billion in market value. The professional-networking site has since climbed another 5 percent.

United Parcel Service Inc. (UPS:US) raised $5.47 billion in its IPO on Nov. 9, 1999. UPS began trading at $50 the following day and rose 37 percent to close at $68.25. It surged as much as 41 percent to $70.31 in intraday trading. More than 12 years later, the stock trades at $74.03, giving the Atlanta-based company a $71 billion valuation.

Visa Inc., world’s largest electronic-payments network, debuted on March 19, 2008. It jumped 28 percent to close at $56.50, after gaining as much as 57 percent. The San Francisco- based company has more than doubled since the IPO and is worth $75.7 billion.

Zynga Inc. (ZNGA:US), the maker of Facebook games including “FarmVille” and “CityVille,” dropped 5 percent to close at $9.50 on Dec. 16, its first trading day, after gaining as much as 15 percent. The IPO valued the San Francisco-based company at about $7 billion.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • FB
    (Facebook Inc)
    • $74.82 USD
    • 0.96
    • 1.29%
  • CG
    (Carlyle Group LP/The)
    • $33.26 USD
    • 0.03
    • 0.09%
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