Billed as the largest tech IPO ever, Facebook’s shares didn’t ‘pop’ as many expected. The shares that debuted at $38 closed at $38.23 at the end of trade on its first day. Not the minimum of 20 percent jump that most investors expected. More than 576 million shares changed hands marking yet another record for US markets for trading volumes on debut. Also Read - Facebook gets listed on Nasdaq, will be the largest ever tech IPO
Though one can never judge the success of an IPO on its first day (or even the first week), there is already a chatter about whether Facebook fell flat on the Wall Street. After all, the company reported less than $4 billion in gross revenue last year and has a market cap in excess of $100 billion already. Did the Wall Street show its disapproval to the hoodie donning CEO? Well, in Facebook’s lingo, it’s complicated. Also Read - Mark Zuckerberg gets a standing ovation, kicks off pre-IPO hackathon
Weighing an online company in the same way as other brick and mortar companies, which sell something that consumers can touch and feel, is not prudent. Neither is determining a company like Facebook’s worth on the basis of its last year’s revenue. Facebook’s best days are still ahead of it. And no one can really predict the fortunes of consumer tech companies with any accuracy. Think about it, who could have predicted in 2007 the current market caps of companies like Nokia and RIM? Or for that matter, who could have said that a product that did not exist till January of 2007 would contribute more than half of Apple’s revenues? Fortunes in this industry swing, suddenly and rapidly. Also Read - Facebook set to raise $16 bn with largest tech IPO
I’m no financial pundit but from what I’m hearing, Facebook probably priced its IPO just right. It was rumored to be priced between $28-$34 before Facebook announced the $38 tag two days before the stock got listed. And it stayed put at $38, ensuring Facebook got every penny it was asking for but leaving nothing for investors to mop up on the first day. Again, it is too early to pass a judgement whether the IPO was a success or a failure.