Facebook's IPO Do-Over, This Time At $32

Clearly, Facebook's (FB) $38 IPO was a bust (because the price dropped). So, the "market" took matters into its own hands. First, it tossed out the Morgan Stanley (MS), Goldman Sachs (GS) JPMorgan Chase (JPM) triumvirate's hype, dismissed Nasdaq's day-1 blunders and ignored investors' cries of "Foul!" Then, it focused on the real Facebook: A large, unique company with broad market appeal, a global brand name, and a potentially bright future.

So, what is the result? $32 is the market-determined IPO price. Yes, some (many?) public investors paid the $38 Wall Street IPO price or higher. However, they didn't have all the information and/or they were unable to react because of the Nasdaq's foul ups. However, the information is out now, and Nasdaq is operating smoothly. Therefore, the real IPO price can be determined by the market, and it looks to be $32.

To see this new IPO price being determined, here is the trading so far, in five-minute increments.

                                                                                                                                                                               (Stock chart courtesy of BarCharts.com)

Note the "OBV" (On-Balance Volume) line. It's an important buying/selling trend measure. OBV nets the volume by price movement (up = +shares traded and down = -shares traded). By early Monday, with the news out and all trades handled, the OBV had dropped to about -105 million shares. Since then, it has basically moved sideways, meaning the selling trend has apparently passed with buyers willing to pay the $32 price.

The bottom line

It's time to forget Wall Street's $38 FB IPO missteps. While the details of what went wrong and the repercussions will be interesting, they are irrelevant to the stock's payoff from here. Rather, we need to focus on the stock market's $32 pricing of Facebook's IPO redux.

Investors now can focus on how Facebook (the company) will perform from here. If they agree that "Facebook is a large, unique company with broad market appeal, a global brand name, and a potentially bright future," then buying/holding a $32 position looks wise. The original $38 IPO price or the $42 opening price are immaterial to that decision.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FB over the next 72 hours.

Additional disclosure: Positions held: Long U.S. stocks

6 thoughts on “Facebook's IPO Do-Over, This Time At $32

  1. I bought FB and got kick out at my 16% stop - no problem there - the way I see it - people are looking for an ass to kick because of so may fingers in the pie and do not want to eat it. The product became defective thanks to the big boys and their greed and now the little guy can not take it any more - the fat cats get a break and the little guy gets the end of the stick, it is amazing that this "fiasco" still very quite (without violence).
    It seems that the words fiasco and Facebook can now be interchangeable, only time will tell.

  2. I am so sick and tired of the sociopathic parasites in Congress jumping to the rescue of the FB traders. I bought Ford and it went down, so what. Anybody jumping on the IPO band wagon of FG is a moron anyway. I love hearing from the people who bought it "for the long run". What is your long run, 4 days? What a pathetic joke.

  3. Gee, do you think that just maybe the Big Boys knew there just might be buy orders for 100 million + shares in the first few minutes? And that maybe a little glitch would give them plenty of time to make some money on the poor suckers who put in their market buy orders at the open?

  4. I bought Facebook at 40. I bought it for a long term position. The critics are saying that more shares should not have added at the last minute and that deluted the value. But if they had not added additional shares then it would probably have shot up into the $50's or higher and then come tumbling down. That would have hurt alot more. They now have enough money to solve their mobil problems. How about Sprint, I heard that they might not survive two more years. All these negative issues that have been brought up are being look at now. if the Facebook folks were unaware they are not now and probably going resolve all these issue. The short terms folks did not make the killing they thought they would. The long term will be good. If the stock drop more I will buy more. We shall see.

  5. OK I am upside down will the Government Bail me Out..

    I am not Union but they over charged me....

    I am an investor and bought for the run, same as homeowners should have been told., and the Auto workers who over charged for their services, along with Unions who did not do nothing but cause trouble and expenses.

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