Bloomberg has declared the Facebook Inc (NASDAQ:FB) IPO the worst big offering of the decade today after the firm saw a 13% drop in its share price in its first five days of trading. That decision is numerically verifiable and so is an accurate depiction of what has happened in the last week. But is Facebook’s disaster the worst IPO that has ever taken place?
Between insider trading allegations and huge mistakes by the Nasdaq in the first day of trading followed by the law suit filed by investors almost instantaneously and the huge fall in the stocks value the offering may well have been worst of all time.
Electron Capital returned 3.1% for October, bringing its year-to-date return to 8.3%. The MSCI ACWI gained 6% for October, raising its year-to-date return to -22.3%, while the S&P 500 returned 8% in October for a year-to-date loss of 18.8%. The MSCI World Utilities Index was up 2.7% for October but remains down 13.5% year to Read More
The biggest problem with the IPO was also its most basic. The trading software used by the Nasdaq exchange to offer the company suffered some massive glitches. The brokerage firm Fidelity Investments announced today that they were currently dealing with thousanbds of complaints from investors who saw their trades take place at prices they had not ordered.
The Nasdaq was not capable of handling the IPO and it failed completely in the execution. They were not the only source of issues on the planning side however. Facebook and their underwriters decided to boost both the size and the price of the IPO in the lead up to the first day’s trading. That move caused havok for investors who were left with completely new valuations to deal with.
There is also the matter of the insider trading questions which are currently being investigated. It has been alleged that some of the underwriters of the IPO on the word of a Facebook executive warned some of their investors off of buying the shares in the offering. That unethical and possibly illegal behavior will add to the blight.
The most important metric to judge the IPO by is innumerable. The effect of the offering, which at one stage was projected to change the tech industry, will not be a good one. Investors who avoided this IPO will still be blighted by it. Tech IPOs in the medium term future will still be cast in light of Facebook’s complete failure in their offering.
Facebook’s IPO will have a huge effect on the tech industry. It will not be forgotten for some time. It may well have been the worst IPO ever.