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Facebook Shares Gain Traction, But Trading Price Comes Down
The hugely anticipated Facebook IPO closed at US$ 34.03 per share and soon its shares started facing the grim reality when the prices dropped by 11% on Monday.
Facebook had set on a course to gain a very high valuation of US$ 104 Billion. Accordingly, it even jacked up its share prices. Though the shares did trade at the announced price band between US$ 34 – 38, it was a different story on Monday all together. A while ago Facebook had sought additional help from many financial institutions to increase the width of the spread. Accordingly, the company’s lead underwriter (Morgan Stanley) was primarily responsible to keep the prices high on Friday, by buying the shares in huge quantities. This was done to prevent a ‘Busted IPO’, wherein share-prices drop below the announced price-band.
There are quite a few assumption of what would have happened?
- Quite near to the IPO, some disturbing insights about Facebook were revealed and it was learnt that though Facebook was a preferred medium to socialize, users were wary of the advertisements.
- Since advertisements are the principal revenue earners for it, investors may have backed off?
- Finally the fact that Facebook’s Billion Dollar acquisition of Instagram will not become useful immediately may have been the final straw.
Facebook’s rise to fame & similarly to monetary glory has been legendary as it has captured the hearts & minds of people across countries & generations. Hence we will have to wait & see a realistic price for the Facebook shares to stabilize.
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