May 21 2012
Over the past 8 years Facebook has been urging its user to be more public about their lives and finally Facebook took its own advice. Unless you live under a rock, you probably heard that Facebook finally debuted on the Nasdaq. It ended the day at $38.23, valuing the company at $105 billion. Only 23 companies are worth more then Facebook and yet most of the media coverage has labeled the IPO a failure.
Why? Because all those wannabe shareholders who subscribed during the IPO roadshow did not get a pop of 25% or more on day one. Personally, I believe they got what they deserved, they didn’t do their homework and were being lazy. The real money was made by the ones who took the risk many years earlier as investors and more importantly the employees.
The biggest losers were probably the private clients of Morgan Stanley, which was the lead manager. Those clients thought they had special access to one of the most anticipated IPO’s only to find out people with an E-Trade account could buy the stock a couple hours later for the same price. face palm. Don’t get me wrong I still think Facebook has an uphill battle to justify the $100+ billion market capitalization it has. Do I think Facebook can go 5x or 10x from here? At 10x that means Facebook would be the first trillion dollar market cap company. Seems highly unlikely, but they seem to be in the right place to take advantage of it.
Ironically, the biggest issue they will face is being publicly listed. Those quarterly conference calls might get brutal when analysts start dissecting the quarterly revenue numbers whereas the company will be focusing on the long term strategy and numbers.