Facebook IPO Date Finally Here, Price Set At $38 Per Share

Michael Convente May 18, 2012 4
Facebook IPO Date Finally Here, Price Set At $38 Per Share

The long-awaited day is finally here – Facebook will launch their IPO this morning at 11:00am EST at an initial price of $38 per share.  By the closing bell at 4:00pm EST, almost 1,000 Facebook employees will become instant millionaires, with some early investors set to increase their net worth by billions.  Demand from retail investors is so strong (as I recapped with my article yesterday), that trading firms such as Fidelity have specifically given their customers information about placing an order for Facebook stock.

Mark Zuckerberg, Facebook founder and CEO, officially opened the bell for the NASDAQ at company headquarters in Menlo Park, California just about 30 minutes ago, starting the day’s trading frenzy.  However, shares of Facebook (symbol “FB” on the NASDAQ) won’t be available to purchase until 11:00am EST, similar to other recent Web 2.0 companies that have listed on the NASDAQ.

Some analysts have expected a pop in share price of at least 50%, though others have tempered their predictions by suggesting a closing price somewhere around 15-20% higher than the initial price of $38 per share.  Whether Facebook’s share price will continue to head higher over the next few months (similar to Google and to a lesser extent, LinkedIn) or head down from its IPO price (as Pandora and Zynga have) is yet to be seen.  Facebook’s Price to Earning (P/E) ratio is quite low if you use their full 2011 profit ($1 billion) and divide it by the number of shares Facebook is offering today (421 million).  That would put a theoretical P/E ratio at 2.37.  A healthy P/E ratio range is generally agreed to be between 10 and 17, so Facebook will have to work very hard to further increase profits to justify its massive company valuation.

I’ll be updating this article throughout the day, so be sure to check back as the day moves forward.

10:15am EST update – Our friends at TechCrunch have posted the first set of pictures from Facebook’s headquarters in California as they Mark Zuckerberg rang the opening bell for the NASDAQ.  Check them out!  Also, the Wall Street Journal Twitter feed has a picture of the NASDAQ ticker wall welcoming Facebook to their list in New York City.

11:04am EST update – Facebook’s IPO has been pushed to 11:05am EST.  Stay tuned to coverage of Facebook’s stock trajectory throughout the day.

11:11am EST update – Still no shares being trading, perhaps it will go live at 11:15am now.  As you can imagine, the demand for shares of Facebook could crash the trading computer systems, so I figure trading firms are preparing for this right now and could use some extra time to be 100% ready to go.

11:19am EST update – According to @CNETNews, the NASDAQ is saying that there is a delay for trading Facebook stock.  No word about when trading may actually begin.

11:30am EST update – And we are live!  Facebook stock (FB) has officially opened.  A quick pop to $42, up 12%.  We’ll see how it goes for the rest of the day.

11:40am EST update – Facebook has stabilized at $40 per share, up about 5% from its initial price of $38 per share.  Clearly, this is not going to be a mega pop, which could leave both investment firms and retail investors disappointed.  Let’s see where it’s at later in the afternoon.

3:33pm EST update – Facebook stock is back to its initial price of $38.  It dropped a few dollars in the late morning before rebounding in the early afternoon to just under $42.  However, right now the stock is trading at $38.04, a meager 0.05% above its initial price.  For day traders hoping for a pop and drop situation, that clearly hasn’t happened.  Which makes a lot of sense considering that Facebook shares have been trading on the restricted secondary market for over two years.  In essence, all of the upside of company valuation has already been factored in before retail investors even had a shot to get into the game.  And as such, Facebook shares are set to end the day right where they started – at $38.

4 Comments »

  1. Finance King May 18, 2012 at 12:21 pm - Reply

    You can’t use their “full earnings”; the IPO isn’t for 100% of the company. FB’s P/E is around 125x.

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