Facebook Faceplants as Buyers Are Nowhere to Be Found
The world's most eagerly-awaited new tech stock just hit the bricks.
MINYANVILLE ORIGINAL Facebook (FB) should be considered a huge success for everyone on the inside that got rich on Friday's IPO -- the Zuckerberg-Chan clan, Eduardo Saverin, the smart VC guys that got in early, countless Facebook employees, and maybe even the Winklevii.
But with the stock breaking the $38/share offering price and hitting a low of $33 this morning, it's looking like a mess for everyone else.
Think about it.
The lack of a big one-day pop indicates that the bankers extracted maximum value for the company, but it's a negative indicator for the broader markets.
If there was any stock that could get the individual investor revved up again, it would be Facebook, which I'm sure many people imagined could be an in-your-face "obvious" home run like Apple (AAPL), at least until the fundamental bugs became obvious. (See this piece from February for more details: Facebook, Running Out of Bodies, Is in Need of Major Reacceleration in Monetization Rates.)
On Friday afternoon, online broker TD Ameritrade (AMTD) said that trading in Facebook accounted for 25-29% of Friday's trading volumes, according to the Wall Street Journal.
So the individual investor showed up. But how burned did they feel this morning when they fired up their stock quotes?
If people can't get pumped for Facebook, then what will it take to get them excited about investing again?
And what does this say about excitement for future IPOs and Wall Street's image?
Again -- the bankers did their job by extracting maximum value for Facebook, but right or wrong, the individual investor is going to feel like Wall Street pulled a fast one and that's going to make the next deal doubly hard to sell.
However, Wall Street-haters should be happy that the big underwriters on the deal like Morgan Stanley (MS) and JPMorgan (JPM) may actually lose money on the deal!
According to Bloomberg, the banks took down $176 million in fees, which sounds like a lot of money, but as a percentage of the $16 billion deal, was actually small by Wall Street standards.
Now on Friday, Minyanville's Michael Sedacca pointed out to me that Facebook stock was supported by a ton of bids at the $38 mark, indicating that the underwriters were desperately buying stock to avoid the embarrassment of having Facebook break the IPO price.
That would indicate that the banks are praying that Facebook doesn't fall to the point where the losses on the stock they own outweighs the profits they made from the IPO fees and subsequent trading commissions.
As I indicated in real-time on Minyanville's Buzz & Banter (click here for a Free Trial today), I went short Morgan Stanley just before the close on Friday.
Facebook faceplanted, and I see that as hurting Mother Morgan in the near-term as investors extrapolate the negativity outward.
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