Why Facebook's IPO Flop Is Good News
A multitude of issues impacted Friday's action in the stock. The Nasdaq exchange had to delay opening the shares, and underwriters reportedly stepped in and bought the stock when it touched the IPO pricing level of $38 per share at numerous times during the session. Both of these occurrences are never a good sign but taking these kind of hits early and alleviating some of the hype around the social networking giant may ultimately be a positive.
Wedbush Securities analyst Michael Pachter believes the underwriters may have overestimated the demand for shares on Friday, by adding an additional 84 million shares to the offering. However, Pachter still believes that Facebook has "huge upside potential for revenue and earnings growth," given its size and reach in the advertising markets. Pachter rates shares of Facebook "outperform" with a $44 price target.
Facebook priced its IPO at $38, opened at $42.05, quickly jumped to $45, and settled at $38.23, up just 0.6%. The stock was diving in Monday's action, falling as low as $33. It was changing hands at $33.66, down 12%, in recent trades.