Facebook (FB) IPO: The Winners and Losers - Hedge Fund Alpha (formerly ValueWalk Premium)

Facebook (FB) IPO: The Winners and Losers

Facebook (FB) IPO: The Winners and Losers
Friday saw the long awaited IPO of Facebook Inc (NASDAQ:FB) and it failed to live up to the hype they got over the past year.  Shares of Facebook Inc (NASDAQ:FB) closed up only 23 cents after hitting $40+ mid-day.  Facebook Inc (NASDAQ:FB) did set a record for trading volume but the huge share float combined with huge retail investor presence, made institutional investors pass on the stock.

During this IPO, there were certainly winners and losers.  The winners were Mark Zuckerberg, Goldman Sachs Group, Inc. (NYSE:GS) and the brokerage firms.  The losers were NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) and Morgan Stanley (NYSE:MS), and retail investors.

Lets start with Mark  Zuckerberg first.  This past week has been huge for the Facebook founder.  First, he celebrated his birthday, Facebook’s IPO and his marriage to long time girlfriend, Priscilla Chan.  Zuckerberg has received some criticism over his wedding, which was the day after the IPO, because of the “lack of sensitivity” for shareholders.  The bottom line here is that the Facebook CEO is not only a lot more rich but he is married now also. We hope he signed a pre-nup agreement.

The brokers made a lot of money on the trading. According to TD Ameritrade Holding Corp. (AMTD), Facebook Inc (NASDAQ:FB) made up 22% of all the brokerage’s trading volume on Friday. This means a lot of money for the firms from traders buying and selling of the stock.

Goldman Sachs is rarely a loser, it seems, when it comes to IPOs and other funding ventures.  According to the SF Gate, Goldman made $1.09 billion from selling its stake on the IPO date.  Goldman was an underwriter for the deal which made them stand to make a lot of money.  If the investment bank sells its remaining 4.3 million shares, they could be looking at an additional $1 billion in profits.

Moving on to the “loser” side of the spectrum, the Nasdaq embarrassed itself on Friday, after the IPO was delayed due to mechanical failure.  Unfortunately, the system was overloaded with orders of Facebook and it simply just stopped confirming orders.  This certainly played a role in the IPO’s failure as a number of high-priced orders never went through by the time the closing bell sounded.  The SEC has said they will be looking into more details of the software failure that occurred last Friday.

Retail investors were also losers. Even though the IPO price was $38 the stock opened at approximately (different numbers) $43 a share. Any retail investor who bought Facebook shares on the open at the time of this writing have a 23% loss in less than a full day of trading, not a great annualized return.

Last but not least, Morgan Stanley.  The main underwriter of the deal certainly got the worst of the deal as the investment bank bought sizeable amounts of Facebook towards the end of the day to keep the price from falling through the IPO price of $38.  Luckily, the $38 level held and Morgan Stanley successfully completed its job.  Unfortunately, Facebook is down 11% today which gives Morgan Stanley a hefty loss on the trades.

The bottom line, Facebook’s IPO was a failure and continues to get worse today as the price was in full free fall.  Zuckerberg and Goldman made it out on top but Nasdaq and Morgan Stanley especially have some new problems that need to be dealt with fast.


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