Facebook Inc (NASDAQ:FB) held its IPO last week to investor frenzy followed by a sharp pang of disbelief and regret. The most anticipated IPO in recent history is now a day that investors will never forget. Between trading difficulties and accusations of misdoings by both Morgan Stanley (NYSE:MS) and Facebook itself Friday was a bad day for the market and the social media company. Monday was worse.
Shareholders who were burned by the deal feel betrayed by those who advised them into it, particularly if their money was under management at Morgan Stanley. A less talked about but equally disastrous IPO would have been called a mistake. Facebook stock was so popular it has caused real trouble for the marked.
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Nasdaq OMX Company is unlikely to be handed the keys to any large tech company offering for some years as it tries to put this disaster behind it. Facebook itself is condisering a move to the NYSE on account of the glitches in the Nasdaq system that robbed investor confidence early on the first day.
Investors will remember the hype. Facebook is a brand unlikely to go away. Their days social networking will be felt almost as a personal insult, assuming they don’t leave forever. Two major things were sucked out of the market on IPO day.
The first is the confidence of investors, particularly smaller investors, in tech IPOs and possibly IPOs in general. The second is a great deal of capital that has ended up with Facebook rather than still in the market looking for somewhere to invest.
Yes many of Facebook’s employees may leave the company with their riches in hand and begin their own start ups or invest in somebody else’s. That won’t plug the holes left in the market by Facebook’s disaster and it will not solve any problems.
When Facebook was initially valued at $34-$38 in the lead up to its IPO many analysts said that it was overvalued but it was just a symptom of the tech bubble. Linked In Corporation (NYSE:LNKD) closed on Thursday at near 105, Zynga Inc (NASDAQ:ZNGA) at 8.27. Neither has recovered from last week’s slump and Zynga is down to 6.60 today.
Facebook may have made a lot of people angry and may have put back their own business prospects for some time but they have done one thing right. The company has at least delayed the effects of a second tech bubble. For that we can be thankful to Mr. Zuckerberg.