Facebook IPO – A Superficial Sideshow to the Big Story in Markets

In Facebookland, Friday’s initial public offering (IPO) of Facebook was a debacle. NASDAQ – the exchange where Facebook chose to list – said it was ‘humbly embarrassed’ by its failure to guarantee orderly trading.

Is anyone ever proudly embarrassed?

What a disgraceful performance by the entire investment community in America. Wall Street is a shadow of its former self. It should be able to put on a world-class sideshow to distract people from the reality of how terrible the market is. Yet it managed to bungle a gift-wrapped opportunity to pump shares.

Facebook shares closed their first day of chaotic trading exactly 23 cents higher than the IPO price. The news wires reported that the IPO’s underwriters had to intervene late in the day and support the stock to prevent it closing below $38. The company closed with a market cap of $104 billion, or around 122 times trailing 12-month earnings.

Late-day Volume Spike Saves Face

Late-day Volume Spike Saves Face

Source: StockCharts

The Facebook IPO is a superficial (but entertaining) sideshow to the big story in markets. That’s probably fitting. Facebook IS a superficial (but entertaining) sideshow. Bull markets – or would-be bull markets – require a hopeful narrative about the future that people can believe. The trouble today is that very few people believe the immediate future is getting better, or that Facebook’s public listing is a sign that the world’s debt crisis is over.

Dan Denning
for Markets and Money

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Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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How does it go: great things from little acorns grow, except facebook is not small, is it?, so where to from here?. I have absolutely no interest in facetwitter etc, its just more of ‘Bread and Circuses’. So i say to myself what is happening behind the scenes?. I have just read that although Greece is a basket case, Italy is in far worse shape than we have been told. DR of course, although most times a bit previous, is usually on the ball, So i await more DR musings. Just in case i’m a bit behind the times, we… Read more »
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