Maybe there was something to the sentiment that the Facebook initial public offering (IPO) was ridiculous after all. With just over two days' worth of trading under its belt, Facebook's NASDAQ-listed stock (FB) has dropped below $32, down nearly 16% from its $38 IPO.
On Friday, Facebook shares ended their first day of trading just pennies higher than the $38 initial public offering price, the amount large investors paid to get in on Facebook a day earlier than the rest of the country. But since then, shares of Facebook have been in a tailspin. The company lost 11% of its value on Monday, falling to $34.03. The selloff is continuing today, at least in early trading. If there's any good news for investors here, it's that Facebook is actually up from its all time low — earlier today, the stock dipped as low as $30.98 a share.
Already, people are pointing fingers, trying to find out exactly what went wrong. A lot of investment experts are blaming Morgan Stanley and Facebook's decision to increase the number of shares up for offer — a move that led to investment funds getting more shares than they expected they would. "The underwriters completely screwed this up," explained Michael Pachter, an analyst at Wedbush Securities, in an interview with The Wall Street Journal. The offering "should have been half as big as it was, and it would have closed at $45."
Early trading issues with the NASDAQ stock exchange were also being blamed by some individual investors. George Brady, a 66-year-old recruiter, wound up being sold 1,000 shares of Facebook stock shortly after trading opened. According to Brady, he tried to withdraw his order, but his Charles Schwab account wouldn't let him. And even after the trade happened, technical problems prevented Brady from knowing if the trade had been executed. "I was stuck for six hours trying to figure out whether I owned this dog or not." Brady eventually sold his stake Monday, taking a $2,770 loss.
Some investors like Brady may be able to get a partial refund on their losses, however. The NASDAQ market is allocating "at least" $13 million to resolve bad trades, an effort to reimburse those who lost money due to NASDAQ's technical error at the start of Facebook trading on Friday. Given that a large number of major Wall Street firms suffered losses due to an inability to make trades, however, there could be very little left for the "little guys."
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