Market Beat: The Facebook IPO follow-up | SierraSun.com
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Market Beat: The Facebook IPO follow-up

Ken RobertsSpecial to the Bonanza

TRUCKEE, Calif. andamp;#8212; Most of you are probably aware that Facebook began trading as a public company on Friday, May 18th. The companyandamp;#8217;s initial public offering was eagerly awaited by investors. The Facebook IPO was one of the most significant new technology offerings in a long time. The stock priced at $38 per share at the high end of its expected range, which gave Facebook a value of more than $100 billion.Trading was supposed to start on Friday, May 18th at 8:00 a.m. Pacific time. Thousands of investors sat at their computers, placed trades and became very disappointed. The trading was delayed due to a technical glitch by about 30 minutes, but even after trading began, the order flow was a mess and investors werenandamp;#8217;t getting confirmation of their trades for hours, which has led to some losses and now lawsuits.On the first day, it traded as high as $45 and the low was $38, which was the IPO price. What that means is that on the first day public investors bought the stock at prices between $38 and $45. Insiders who had shares prior to the public trading were the sellers, so they made out well. Since trading started it has recorded a low price of $30.94 and most recently closed at $31.91.So, who were the winners and who were the losers? Well the underwriters of the offering made more than $100 million from the issue and by selling their extra shares in whatandamp;#8217;s known as a andamp;#8220;greenshoeandamp;#8221; maneuver. The Facebook insiders did fine. Mark Zuckerberg sold about $1.1 billion worth on the first day and his stake was valued at about $19 billion. Bono, the lead singer from U-2, was an original Facebook investor and made $1 billion on the deal and that was more than he has earned in his entire music career.The big losers were the investing public and the market making firms. It looks like the market maker losses will total about $100 million. Citigroup has reported a $20 million loss and Knight Capital and Citadel have reported losses between $30-$35 million. UBS should also have losses but at this point has not made any disclosures.Furthering the controversy are reports that Facebook lowered its business projections just days before the IPO and that Morgan Stanley shared that information with its institutional clients, but did not share that information with its advisors or thousands of individual clients. Several lawsuits have already been filed and there is talk of a Congressional inquiry.It will be interesting to see what plays out over the next few months. I also want to disclose that I am now a Facebook owner andamp;#8212; I picked up a few shares in the days after the IPO, once the price settled, and plan to hold them long term.Kenneth Roberts is a Truckee based Registered Investment Advisor. Information on his money management service can be found at http://www.fusiontargetretirement.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.


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