So Facebook, yeah, $38, yeah. A news story? Not really.
Here's the rub. None of the journalist are asking any of the right questions because at this point they are simply parroting what banks and other companies are saying. This is ludicrous.
Facebook could have been a public company a couple years, but what no one was watching or paying attention to was simple. They weren't at the top of their market yet. Facebook built value for eight years, and they reached the top of their valuation the day they announced they were finally going public.
So many people were holding shares in Facebook that they should have gone public at least a year ago. However creative accounting and a few hearings kept them off the radar for a while. Once they could no longer delay they created significant media coverage and set a share price of $38 to maximize return.
The idea of a share price in an IPO is to maximize shareholder return. Not the underwriting banks, who'd actually have liked a lower price so that they and their best customers can see a large bounce on opening day. This is a huge mistake. This means that the bank screwed the company and their shareholders by setting too low a price.
When Google opened at (I think) $98 Wall Street made the same complaints. Of course that stock traded today at $590. Big investors and big banks were just upset that they didn't make a lot of money on opening day. None of those banks are upset today if they held the stock.
Facebook maximized the capital they needed to raise, and that was their job. The people who made Facebook got the money they earned through their compelling work. The underwriters, well, they'll just have to buy and hold. Just like they did with Google. I think a 400% return is fine, just be patient.
