Facebook is now officially on sale! Check out our live blog from earlier today and get caught up on all the action.
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4:40: One last update:
BREAKING: SEC to review Nasdaq trading issues related to Facebook.— CNBC (@CNBC) May 18, 2012
4:11: So to sum up the day: There was no pop and investors largely took it on the chin as the stock had its first trade of the day at $42.05 and then spent the entire day below that line. A rough day that was made worse by technical problems that kept many big traders from even knowing how much stock they owned. Facebook itself will be fine, however, as they got exactly what they wanted from the stock sale: $38 a share, with no outsiders taking away millions in value by flipping the stock for a quick profit.
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The underrated story of the day? Zynga, which has its fortunes intricately linked with Facebook, got absolutely clobbered today. Without the protection of underwriters, the stock was halted twice today and lost 13 percent of its value. It will certainly be an interesting Monday morning for both companies when trading resumes.
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4:04: Well, we said early that Morgan Stanley, as the lead underwriter of Facebook's IPO, did a fantastic job of pricing today's stock offering, but they may have done a little too fantastic. A huge sell off in the last hour of the trading day sent the stock price back to its offer price of $38 dollars, but a "heroic" effort by the underwriter — buying up what stock they could at $38 to prevent the price from dipping below that mark — managed to hold off an embarrassing red number on Facebook's first day on the market.
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4:00: IT'S OVER! THEY DID IT! FACEBOOK HOLDS AT $38.23.
@jonathanwald you dont even understand how amazing this is right now, the firepower being used to defend 38 is unreal— Downtown Josh Brown (@ReformedBroker) May 18, 2012
3:51: Facebook's underwriters are waging a huge battle to keep the stock price above $38. They basically have to buy up as much as they can at that price to prevent it from going lower. It's bascially been resting at the bottom for the last 10 minutes, and they have ten minutes more before the clock runs. As some have pointed out, that protection won't be there next week or next month.
3:42: 550 million shares traded today.
3:40: It's back to $38.00 even. 20 minutes left.
3:25 p.m.: Wit a little over 30 minutes left in the trading day, Facebook is drifting back to $38. It could end the day essentially unchanged.
2:11: Stock analyst Brian Wieser at Pivotal Research has given Facebook its first "Sell" rating. He says he likes the company, but not the stock. "It's complicated."
2:00: Gary Kaminski on CNBC says to expect a flurry of activity in the final hour of trading, as so many "retail" investors (individuals and day traders, as opposed to large funds and banks) will probably look to unload the stock before the weekend and were only planning to flip the stock on the first day.
1:45 p.m. ET: I's now been about two hours since Facebook shares started trading publicly and after a dramatic morning things have calmed down a bit. So now's a good time for a quick recap and evaluation:
So what happened? The trading was slated to start at 11:00 a.m., but the investors who actually got to buy the stock at the IPO price of $38 a share before trading became active ordered an even greater than expected number of shares, many at the last minute, and that appears to have overwhelmed NASDAQ's systems. They held off on live trading for 30 minutes to try to clear up the backlog of orders, but then trading went live at 11:30. The first trades were priced at $42.05, about 13 percent above the open. The initial volumed of trading was massive — over 100 million shares changed hands in the first five minutes. Within about 15 minutes, however, trading slowed dramatically and the price began to plummet. Within 25 minutes, it had dropped all way back down to its opening price of $38. The stock never dropped below $38 due to a lot of heavy buy orders pegged to that price, probably by the underwriting banks to make sure the stock stayed stable. The stock has since crawled back into the low $40 range, but has not yet topped the first trade of the day at $42.05.
Isn't that a big disappointment? Depends on what you hoped to get out of today. It's disappointing to market watchers and speculators who saw massive first-day pop from the likes of LinkedIn and Zynga and hoped the Facebook stock might soar as well. But from the perspective of Facebook and the banks who underwrote the offering, it's a pretty remarkable success. Kayla Tausche of CNBC reported that the goal of the banks was to provide a first-day bump of around 5 to 10 percent of the IPO price (of $38). That way, their institutional customers who bought the stock at $38 get a nice premium for investing early, while still giving Facebook and its shareholders fair value for their stock. When the price jumps 50 or 60 percent in one day as some other hot stocks have in the past that looks impressive and makes a lot noise — but that is money that goes to the bank's clients and not the company that's trying to raise money. Right now, the stock is up about eight percent (right in the heart of that target pop) which means Morgan Stanley and the other banks who set up this IPO did an excellent job matching buyers to sellers at the right price.
What about the glitches? Did they ruin the pop? Well, there's no way to know what might have happened had the technical side of the trades gone more smoothly. We didn't know it at the time, but NASDAQ was failing to send trade execution messages to most of its largest traders. That means the traders couldn't confirm that their previous buy and sell orders had gone through, meaning they couldn't accurately calculate their positions or relay that info to clients. That led many of them to scale back their trading dramatically, which helped contribute to the falling price. Traders are now telling journalists everywhere that there is "palpable anger" over the technical glitches that screwed up their morning. There is likely to be a lot of fallout from this mess in the coming weeks and people look to assign blame. However, the underwriters appeared to have protected the stock from total collapse during the glitch and helped nurse it back to a better level, so they deserve some credit for that too. Big pops often lead to big collapses and that's not going to happen today. All in all, a great performance by the banks.
Now what? A lot of other social media stocks and the NASDAQ exchange in general have not done well today, possibly because of disappointment over the lack of the huge pop and technical glitches that undermine confidence. But the bottom line is the Facebook is now worth over $100 billion and that's no longer an imaginary valuation by hopeful venture capitalists. A lot of long-time employees and early investors were handsomely rewarded today and everyone who wants to own the hottest company on Earth will now get their shot.
All is calm for now, but we'll check back in later in the day to see how the stock is doing and give you a report when the market closes.
1:10: BuzzFeed has a nice breakdown of the top stock sellers today, and how much they just made unloading their Facebook shares.
12:41: PRICE UPDATE: $41.20, up almost 8 percent from the IPO price, but still down from the first trade of the day. It's been on a slow, but steady climb up since bottoming out during the brief panic of $38. The NASDAQ is out of the red now too. Up about 2.6 percent.
12:31: CNBC reports that Zynga resumed trading after nearly 50 minutes of being suspended and then was immediately re-halted. The suspensions were likely triggered automatically due to extreme volume. Zynga's games provided 12 percent of Facebook's overall revenue.
Well-executed IPO by both the mgmt team and i-banks. Media loves "POP," but "POP" cost company $$ and increases LT risk.— Bill Gurley (@bgurley) May 18, 2012
12:19: WSJ also reports that traders were frustrated by the poor communication.
12:11: More on NASDAQ's clogged system. CNBC reports that traders were complaining that they were placing orders the trading got started, but they were not confirmation messages from NASDAQ. Since they couldn't confirm that all their positions, many of them felt they had to back off and stop trading. That sacle back contributed to the brief dip back down to 38, but fortunately the underwriting banks stepped into stabilize the price. It's slowly moving back above $40 again, making it's way back to the first trade price of $42.05. (That's a correction to our earlier correction. $42.05 was the first trade price.)
12:07: The price is now back at $40.05, which is where it opened. Zynga is still halted, according to Reuters.
12:02: CNBC says that NASDAQ's system was "clogged" and was having trouble executing trades during the dip back down to $38.
12:01 p.m.: After holding steady at $38, the stock is slowly starting to creep back up. It's now back up to $39.50.
11:53: Facebook is now trading at $38 unchanged from its IPO price. It's likely that the underwriting banks are getting involved, buying up all shares $38 to try and ensure it does not go negative.
11:47: After that initial, soft pop, FB is now drifting back down the IPO price of $38. This could be a disaster for those initials buyers.
11:43: Trading of Zynga, the gaming company that's intimately linked with Facebook's platform, has been suspended according to Business Insider. The stock is getting crushed right now. Down 13% on the day. WSJ says several other major tech stocks are down right now: "LinkedIn is down 2.6%, Groupon is off 6%, Pandora down 5%, bit.ly/KuUvj6"
11:38: All the markets — Dow Jones, S&P and NASDAQ — are currently down on the day.
11:37: The volume trading is over 100 million shares in just six minutes.
11:34: Correction: The opening bid was $42.99, up 13% in the opening trade.
11:30: AND IT'S STARTED! $42.05 WAS THE OPENING BID. That's a 11% jump over the initial price.
11:29: The Wall Street Journal says "traders are having problems canceling orders ahead of Facebook IPO."
11:27: Jim Cramer on CNBC on the possibility that it might a software problem: "This is not the time for amateur hour."
11:22: 11:15 has come and gone and NASDAQ is halting trading due to the unprecedented demand from the retail investors. We'll just have to wait for NASDAQ to update.
CNBC: "I just want to make sure we don't whip ourselves into a frenzy on the short term value." That horse has left the barn.— Heidi N. Moore (@moorehn) May 18, 2012
11:08: Trades are now delayed until 11:15.....
11:05 a.m.: Carlos Quintinalla of CNBC says that for every $10 that Facebook's stock price rises above $38 ... that's $4 billion in value to shareholders. More fun facts from Carlos: Bono, who made a significant investment in the company will make more money today than his entire career in music.
11:01 a.m. ET: Facebook trading has pushed back from 11:00 am to 11:05 to give IPO more time to process. Keep waiting!
10:57 a.m. ET: We're minutes away from the first trades going live and after pricing the IPO at $38 a share — which is what lucky initial investors get to pay for it — estimates are that the first trades will go off at around $43.