Facebook’s IPO Ponzi Scheme Collapsing

Company shares have plunged almost half from their original value. As predicted, correction will place company’s value at the correct level.

AP | AUGUST 16, 2012

Shares of Facebook are plunging to all-time lows after the expiration of a lock-up period that has provided early investors and insiders with an opportunity to exit.

The stock fell 7 percent, or $1.49, to $19.71 in Thursday morning trading.

If the stock hits $19, it will have lost half its value since Facebook went public in May.

It’s been a rough run for Facebook. After one of the most anticipated initial public stock offerings in history, Facebook Inc. suffered what may be the most-botched IPO as trading glitches marred its first day. It’s been almost all downhill since then.

In all, 271 million shares become eligible for sale Thursday, on top of the 421 million already trading. It’s conceivable no one would sell those extra shares, but if too many do, Facebook’s stock could decline.

Firms ranging from Accel Partners to Goldman Sachs, Zynga CEO Mark Pincus and Facebook board members James Breyer, Peter Thiel and Reid Hoffman are among those free to sell stock they own. Microsoft Corp., an early Facebook investor, is another one, though it’s unlikely to sell because of partnerships it has with Facebook.

It’s not yet known whether anyone had sold shares. The stock price decline could reflect investor anticipation of such a move.

Other shareholders, including many Facebook employees, will be able to sell beginning in October. The last lockup period expires next May, a year after the initial public offering.

Facebook Inc. is based in Menlo Park, Calif.

Facebook’s Share Offering Bailed Out by Underwriters

Stepped In to Support Social Network’s Shares at Offering Price

BLOOMBERG | MAY 18, 2012

It was a tepid debut for one of the largest and most closely watched initial public offerings. More than 30 brokerages and banks were involved in the offering, which saw a nearly 571 million shares change hands on Friday—a record for a stock debut.

The Internet company’s shares opened Friday around $42 and within the first half hour fell as low as $38. The stock recovered as underwriters stepped in to support the price, according to people familiar with the matter. But in the final hour of trading, the shares lost steam and fell back to the $38 level.

There have been only six other initial public offerings that raised more than $5 billion since 1995 and the average first day performance has been a 13% gain, according to Dealogic. Two of them, Visa Inc. V -2.06% with a 28% gain in 2008 and United Parcel Service Inc. UPS -1.04% in 1999 with a 36% gain, well outperformed Facebook.

Companies and the bankers who take them public typically like to see a first-day pop in the share price, to make the deal worthwhile for those buying at the so-called inside price and to increase investors’ enthusiasm for the stock.

The debut was marred by a 30-minute delay in the opening of the shares, coupled with reports from traders about lack of communication about orders. That threatened to dent the reputation of Nasdaq OMX Group, NDAQ -4.39% operator of the Nasdaq Stock Market, which competed aggressively with the New York Stock Exchange for the chance to list the deal.

Nasdaq officials told exchange members in a notice at noon that its staff was “investigating an issue in delivering trade execution messages” from trades made in Facebook’s IPO. Around 1 p.m. Nasdaq indicated it would provide a “manual report” to brokers with information on Facebook trades.

Once the stock opened, trading was robust—100 million shares traded in the first few minutes and more than 200 million shares changed hands in the first hour. The record for most shares traded on the day of an IPO had been held by General Motors Co., GM -1.99% at 458 million.

But during the delay, and afterwards, traders said they were having trouble changing or canceling orders they had submitted to Nasdaq’s queue starting at 7:30 a.m.

Read Full Article →