Facebook stock debut fails to sizzle

Facebook CEO Mark Zuckerberg, COO Sheryl Sandberg and other Facebook emplyees celebrate Facebook IPO Friday, May 18 at the company's Menlo Park headquarters. (Zef Nikolla)
May 18, 2012 12:00:00 AM PDT
With the press of a button, Facebook founder Mark Zuckerberg Friday launched a history-making stock offering. But despite the hype and hoopla, the IPO turned out to be kind of a dud.

Facebook's IPO put $20 billion in Zuckerberg's bank account, made billionaires out of several of his company's early backers and will create a tax windfall for California. But it didn't pay off very well for the investors who bought in at $38 per share in hopes of turning a quick profit. When the trading day ended, Facebook stock had risen just 23 cents.

Even at a stock price of 38 dollars and 100 times earnings, Linh Nguyen jumped in.

"I put in a preorder and I only got a fraction of shares at that price, but I put in an order this morning when it opened, but I waited for it to go down," Nguyen said.

The stock fluctuated and then stayed flat, closing 23 cents above its IPO price, not surprising to investors sitting on the sidelines.

"I would watch it and after six months, seven months, figure out if you are going to get in or not, see what kind of business model they bring to the table," Eddie Bakhash said.

Facebook has built a community of nearly 1 billion users but advertising dollars are still somewhat elusive. General Motors pulled its ads this week.

"In the short term, I think the company has set a really high bar for what they have to achieve in terms of revenue and earnings growth and a lot of that is going to come from advertising," Menlo Ventures Managing Director Mark Siegel said.

Serial entrepreneur Bill Nguyen is confident Facebook will capitalize on the mobile market. Nguyen has been involved in eight start ups and his latest company, Color, uses Facebook to deliver live video broadcasts to huge numbers of people.

"We think mobile is how everyone will be connecting to the Web over the next 10-20 years and so Facebook is really interesting because it complements it really well because now I am mobile, because I can connect to everyone at the same time; it's an exciting change," he said.

Despite its East Coast beginnings, Facebook's IPO in Menlo Park entrenches the company in Silicon Valley and an innovative spirit that is legendary.

"I just have the complete faith that it will go and become maybe hopefully another Google or Apple IPO; like, let's just hope for the best I guess," Linh Nguyen said.

California won't be zinged by Facebook's flat IPO; the state stands to gain a huge tax windfall. The governor's office estimates that when Facebook employees begin cashing in, the state will net about $1.5 billion over the next 12 months.

CEO Mark Zuckerberg by himself will put a dent, albeit a small one, in the state's $1.6 billion deficit.

"Based on the state's current tax, the exercise of his options alone will generate $195 million dollars in personal income tax revenue in the state of California," California Department of Finance spokesperson H.D. Palmer said.


Load Comments