The long-awaited listing of Facebook was a major success just for old shareholders, led by Mark Zuckerberg and the other co-founders, while participants in the IPO (Initial Public Offer) are left with a bitter taste after the first day of trading. Old shareholders of Facebook took full advantage from the IPO, raising the package offered for sale and also the selling price. If at some point there was talk of a $5 billion IPO, the first official data showed that Facebook wanted to attract about $10 billion from the market. The offer was based on sales of 337 million shares at a price of between $28 and $35, in total over $10 billion at the average price.
Amid huge demand, the company increased first the price range to $34 – $38, then supplemented the package brought to market by 25% to over 421 million shares. Thus, the amount of IPO reached $16 billion, 60% over the first value officially announced. With the shares sold at maximum price of $38, Mark Zuckerberg, Facebook CEO, has become richer than Google founders Larry Page and Sergey Brin. Zuckerberg’s fortune has soared to $19.1 billion, slightly above that of Page, $19 billion, and of Brin, $18.9 billion.
The other three co-founders saw an impressive increase in their fortune, but another winner is the richest man in Russia, Alisher Usmanov, and members of U2 including frontman Bono and many others. Usmanov is the main shareholder of DST Global (80% of capital), investment fund which came in early as a Facebook shareholder. Thus, Usmanov’s stake in Facebook was valued at $2.6 billion of the DST Global’s $3.25 billion. Usmanov’s fortune has now reached $18.1 billion. Usmanov owns Metalloinvest group and Arsenal soccer club and, after Facebook’s IPO, he overcame Vladimir Lisin, who held first position in 2010 and 2011.
Disappointing debut on Wall Street
With such a great volume of shares sold at a price so high, there was a huge pressure created on the first day of trading on Wall Street, even though many had taken no action in the IPO or could not buy enough. As shares Facebook opened on Nasdaq up by 11% at $42.05, a giant order launched on the market almost blocked transactions and the advance from the start melted immediately, shares plummeting to $38, which is exactly the price of the IPO.
Subsequently, during the trading day, the shares returned to a growth of 5-10%, but finally the price went back forced by the selling pressure. Facebook shares were traded in the last minutes of the first session on Wall Street near the price of $38 and closed up by less than 1%, at $38.23, up 0.61%. A total of 580 million shares were traded, 37% more than the volume sold in the IPO. Therefore, Facebook listing proved a failure through the first day of trading, compared with higher market expectations, that were predicting an increase of over 50%. Not only that these huge expectations have not materialized, but the disappointment of those who bought in the IPO is greater because they see no advantage in admission to trading on Nasdaq. Some investors are worried about the price of the IPO, because at this level, Facebook is valued at 100 times its earnings, while for Apple is 14 times and for Google is 19 times, making Facebook a risky bet.
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