From a Harvard dorm room in 2004 to more than 900 million users in 2012, Facebook has become the world’s largest social network, bringing in an average of 3.2 billion comments and likes every day. On Friday, users finally had a chance to pay for those likes.
However, Facebook’s long-anticipated IPO failed to live up to the hype; stock started at $38 and closed Friday at $38.23; Monday the stock was trading below $34. The IPO was the second largest in U.S. history. According to The Wall Street Journal, Facebook earned $18.4 billion Friday, just behind Visa’s 2008 offering that brought in $19.7 billion. Recent earnings continue to drop.
Mark Zuckerberg shared his thoughts before ringing Nasdaq’s opening bell Friday from Menlo Park, Calif., according to the Boston Globe.
“Right now this all seems like a big deal,” Zuckerberg said. “Going public is an important milestone in our history. But here’s the thing: our mission isn’t to be a public company. Our mission is to make the world more open and connected.”
Zuckerberg turned 28 on May 14 and topped off the week by marrying Pricilla Chan on Saturday. The couple, who dated for nine years, had been secretly planning the private ceremony for months, according to The Washington Post. Zuckerberg’s updated Facebook status received more than one million likes.
Analysts contribute many things to Facebook’s IPO outcome. General Motors pulled its Facebook advertising earlier in the week, according to Forbes. The Financial Times reported last week the FTC is investigating its $1 billion purchase of Instagram, which would possibly delay the acquisition past June. The Telegraph reported Facebook’s mobile advertising strategy was not yet developed, and SocialFish.com reported although 85 percent of Facebook’s 2011 revenue came from ads, click-through rates are only half the industry standard.
Investors were also concerned Friday by Nasdaq blunders, including a 30-minute delay of Facebook’s stock and system glitches not allowing trades to go through or be seen. In a report by The Wall Street Journal, Robert Greifield, chief executive at Nasdaq, said the mistakes were, “not (Nasdaq’s) finest hours.”
Jim Brau, professor of finance in Brigham Young University’s Marriott School, said it’s “anyone’s guess” as to Facebook’s long-term success. Much will depend on whether they stay innovative and on top of the market trends.
“There’s a reason why they call it a random walk down Wall Street,” Brau said.
The social network’s valuation succeeded $104 billion. Facebook is also the largest venture-backed IPO in history, according to a VentureBeat report. It has raised $2.2 billion from venture capitalist firms around the world, double the amount Twitter raised. The enormity of Facebook’s success can be attributed to the lessons they learned from failed social networks such as MySpace and earlier tech IPOs such as last summer’s LinkedIn offering. Facebook is also staying innovative, this month announcing both the addition of users’ organ donor statuses to timeline and group file sharing.
Brau said in reading reports leading up to the IPO, Facebook had considerably talked down the percentage spread paid to underwriters. Usually companies will pay a 7 percent fee after their IPO, and he is interested to see the amount of extra money this negotiation will bring Zuckerberg.
“(To talk down the fee) is basically unheard of,” Brau said.
Added to the fervor surrounding Facebook’s IPO is the news that Sen. Chuck Schumer, D-N.Y., and Sen. Bob Casey, D-Pa., unveiled a proposal Thursday that would subject high-earning ex-Americans to a steep capital gains tax. According to Fox News, the senators targeted Facebook co-founder Eduardo Saverin for renouncing his U.S. citizenship last year, calling the move “outrageous.” This “tax avoidance scheme” would cause the U.S. to lost more than $67 million in income taxes paid by Saverin.
Chris Draney, a business management major from Bartlett, Ill., said although buying Facebook stock is risky, elements such as Instagram’s growing popularity make the stock more secure.
“I don’t think the investors who buy will be very disappointed,” Draney said. “It has the potential to be a very worthy investment.”
Although Facebook’s IPO made them more than $16 billion, there are many people who don’t see the point with investing in a social media platform. Comedian and bestselling author Andy Borowitz offered a Twitter commentary that highlighted this view.
“Official Facebook IPO slogan: You’ve already wasted your time on Facebook. Now waste your money,” Borowitz tweeted.