When Facebook had its initial public offering five years ago, few imagined what a wild ride it would take the markets on. IPO day was filled with drama, and analysts were quick to write off FB stock as a dud. It was an entirely new business model, and many investors questioned how the company would even be able to make money.
Today, Facebook has a market capitalization in excess of $434 billion, and FB stock is one of the five hottest tech names on Wall Street. Let’s take a look at where Zuckerberg & Co. has carried the stock and where it may go next.
FB stock: the first year
Facebook filed for its IPO on Feb. 1, 2012, reporting $1 billion in net income for the year before, which it said was a remarkable growth rate of 65% from the year before. At that time, the social network already had more than 845 million monthly active users. It just passed the 2 billion user milestone this summer.
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IPO day for FB stock was set for May 18, 2012 and investors treated that ill-fated day like a bad omen, as it took a whole year for them to shake the feeling that this was a company that would ever go very far. The social network set its IPO price at $38 per share and ended up raising $16 billion despite all the problems that would mar what was the biggest U.S. tech IPO at that time.
FB stock was fashionably late for its first day of trading on the NASDAQ, as technical glitches kept it from actually becoming available to buy for 30 minutes into the trading session. On that first day, FB stock initially shot upward by more than 15%, but it quickly reversed course and ended the day hovering around the offering price. Shareholders sued because of all the problems, and the NASDAQ’s reputation took a hit because of all the problems.
A week later, it had fallen into a nosedive, and by the end of August, it was trading around a pitiful $18 a share.
FB stock takes off
It wasn’t until more than a year after the initial public offering that FB stock would finally climb back to the IPO price, and since then, the shares have been on a fairly steady march upward. If you had bought even one share of FB stock in the initial public offering, your investment would have quadrupled by now, although it would have taken guts of steel to hang with it for more than a year, watching your investment shrivel slowly.
If you had been even smarter and bought FB stock after the massive pullback at roughly $18 a share, your investment would have grown by more than eight-fold, but again, you would have had to buy and hold it for a long time with no sign of anything good going on.
Facebook makes the transition to mobile
For a long time, the story with FB stock was whether the company could survive as Internet users started gradually shifting from using PCs to preferring to surf the web on mobile devices. There was a lot of debate in that first year about whether the social network could make the transition along with Internet users. The company had to shift from focusing on display ads on PCs to ads specialized for mobile devices.
The turning point for Facebook was in the summer of 2013 when it demonstrated to investors that it was successful in mobile advertising. Since then, it has made a point to always report on its earnings releases what percentage of ad revenue was mobile ad revenue, and this trend has carried forth to other major Internet firms. Investors always want to know what percentage of ad revenue is mobile revenue.
FB stock in the FANG years
Today FB stock continues to hover close to the all-time high of $156.50, and it remains a Wall Street darling and the star of all three major stock acronyms naming the hottest tech stocks. FANG was born in 2015, the first of the three acronyms, and in addition to FB stock, it consists of Amazon, Netflix and Google.
FANG remained hot through all of last year and is still relevant now, although other investors prefer one of these other variations: FAANG or FAAMG. FB stock is still the star of both of these acronyms, with the other variations including Amazon, Apple, Netflix, Google, and Microsoft. Some include NVIDIA or other smaller tech names, although more generally, NVIDIA isn’t large enough to be able to play in the same league with the other names in these acronyms.
FB stock versus SNAP stock
While we’re still in the FANG years, another important piece of Facebook’s history that’s occurring right now is the competition with Snapchat parent Snap. Like Facebook, Snap was considered to be a hot tech IPO at the time of its offering, and its shares plunged immediately after.
Snap was even bolder than Facebook at its offering, however, because the shares it sold didn’t even come with voting rights. Facebook offered shares with voting rights, but more recently, it sought to create a special non-voting class to help CEO Mark Zuckerberg retain control even as he donates some of his shares to charity. Perhaps Snap thought it could do something similar, but before it had proven anything to its investors.
It’s still early in Snap’s history, but it hasn’t yet recovered, and many analysts don’t think it ever will reach Facebook’s caliber. Interestingly, Facebook itself sees something to be concerned about in Snap, given that it time and time again copies the Snapchat parent’s best features.
After everything that has happened in Facebook’s history, it seems odd that it would spend so much time copying a company so many analysts have already written off as a near failure. FB stock has been like a rocket ride to the moon, riding high by simply staying hip and making people feel good by telling them everything they want to hear. Indeed, if Zuckerberg wanted to run for office, he’s probably got the skills.