20 May 2012, Shaun Nichols , V3
Facebook's eagerly-anticipated initial public offering (IPO) failed to live up to expectations Friday as the company's stock sagged in trading.
Initially priced at $38, Facebook's stock was able to close the day at $38.23, raising $16bn and giving the social networking giant a value of around $104bn.
At its highest point, the company's stock hit $45. As the day dragged on, however, interest in Facebook slowed and prices dropped substantially in the final few hours of trading. To prevent the stock from finishing below its initial price, Facebook's underwriters stepped in and purchased shares to keep the price up.
The lacklustre Facebook offering also looks to have impacted the developers who rely on the company's platform for distribution. Zynga, which develops the popular FarmVille and Words With Friends games on Facebook, saw its own stock value fall by 13 per cent on the day.
A Facebook IPO had been viewed by many in the industry as a landmark event in the growth of the social networking and web application market. The company's offering was the biggest in the technology space since the 2004 IPO of Google.
"This is a sign that Facebook overpriced their IPO, clearly there were buyers of this stock and a ton of them but Facebook's financials and outlook simply didn't justify the offer price," said Rob Enderle, principal analyst with the Enderle Group.
"Given it was completely disconnected from the financial performance of Facebook this has little connection to the strength or weakness of the sector and is really only a measure of how much Facebook users are excited about Facebook."
Analysts had expressed some trepidation about Facebook in the days leading up to its offering. Financial analysts called into question the maturity of co-founder and chief executive Mark Zuckerberg over his casual approach to management and his handling of the company's acquisition of Instagram earlier this year.