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The Facebook IPO price was set and the stock is ready to start trading – but will it live up to its hype or sharply sell-off?
The social media giant priced at $38 a share, the company announced after market close yesterday (Thursday).
That makes Facebook the largest tech IPO in history, valued at $16 billion.
It's the third largest U.S. IPO ever, behind first place Visa at $19.7 billion and then General Motors, which raised $18.1 billion.
While the stock has created unrivaled investor frenzy, there is a wide range of predictions for how Facebook will do in its first trading day – and who the real winners will be.
"The ones who make out on IPOs are the early investors, venture capitalists, founders, and underwriters," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The public almost always goes along for the ride…whether or not they get taken for a ride remains to be seen." The Facebook stock price will be determined when it starts trading today at 11 a.m.
Where the cutoff is for considering the IPO a success varies – with many thinking anything below 50% would be a disappointment.
"I think anything over 50 percent will be considered a successful offering – anything under that would be underwhelming, Jim Krapfel, an analyst at Morningstar, told Reuters. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first day pop."
More Facebook IPO Shares Offered This Week
This week the Facebook IPO got bigger as more early investors looked to cash out.
Just after the Facebook IPO price range got a boost, Facebook investors raised the number of shares they sold in the social network giant's initial public offering. While the company isn't selling any more, individual investors like Accel Partners, Goldman Sachs Group Inc. (NYSE: GS) and others offered to sell an additional 83.8 million shares.
That brings that total number of shares sold to 421.2 million, according to a new regulatory filing.
While the news was welcomed by ordinary investors clamoring for shares as Facebook debuts, it's curious why more and more insiders are racing to sell part of their stake. The move may just be a signal of the IPO's astronomical demand – but could make some investors wary.
"If the demand wasn't there, they wouldn't have upsized the deal," Greenwood Capital's Walter Todd told Bloomberg News. "On the other hand, when you see insiders unloading their stakes, you start to wonder why. I could see it turning some institutional investors off."
Concerns Over Facebook Growth
A mounting worry among industry analysts is that more and more of Facebook's massive 900 million user base increasingly uses smartphones and other mobile devices to access their Facebook accounts, in which Facebook does not get paid.
But investors are wagering that CEO Mark Zuckerberg, who celebrated his 28th birthday this week, can overcome sluggish growth by expanding into areas such as mobile advertising and e-commerce.
Samuel Schwerin, managing partner at New York-based Millennium Technology Value Partners, whose firm oversees $1 billion including Facebook stock, told Bloomberg News, "An increasing number of institutional investors are looking beyond the value of the business today and looking at the future growth. Those drivers are extraordinary in size, including international and mobile commerce."
Related Articles and News:
- Money Morning:
Facebook's IPO Price Too High? Not For The WOZ
- Money Morning:
Facebook App Store Will Boost Popularity, Profit
- Money Morning:
Facebook IPO Roadshow Continues without Retail Investors – and Zuckerberg
- Bloomberg News:
Facebook Said to Raise IPO to 421 Million Shares