The Facebook IPO
In today’s day and age of social media there has been one kingpin of them all, Facebook. They were not the first social media site to be created but they have been the most popular. Facebook was established on Feb 4, 2004 and today has over 1.4 billion active users. The company went public and held its Initial Public Offering (IPO) on May 18, 2012. Considered to be a technology company they were the biggest IPO in that field and one of the largest in history. However, it is also one of the most scrutinized and overhyped IPO’s in recent generations.
As Facebook filed their S-1 paperwork in February 2012 to go public they named Morgan Stanley, JP Morgan and Goldman Sachs as their underwriters with Morgan Stanley taking the lead underwriting role. As the underwriters were in place the “road show” commences to generate interest in the IPO and stir up public demand for the stock. In the case of Facebook the demand and hype was far greater than any current IPO ever. The buzz surrounding the Facebook IPO was so high that it was almost destined not to meet expectations. In the initial underwrite of the IPO the shares were valued at $25-35 a share. After the value was established and the IPO was set, Facebook actually made a change in their future revenue stream because they cited mobile apps were decreasing their ability to make money because they didn’t have the capacity to keep up and set up their advertisements on mobile apps. The amendment was filed and placed in the S-1. Despite the red flags surrounding Facebooks IPO the underwriting banks raised the valuation to $35-38 a share and also increased the number of shares 25% to 421.2 million putting them at the 100billion dollar valuation the largest in history (The Atlantic).
To make matters worse the day the company officially went public, NASDAQ had a glitch in their system and was not able to open for trading on time. During the first day of trading shares plummeted about 50% all but...