Facebook IPO: The Emperor Has No Clothes

Stock's rough first day has pundits asking if it's DOA
By Kevin Spak,  Newser Staff
Posted May 21, 2012 11:17 AM CDT
Facebook IPO: The Emperor Has No Clothes
Mark Zuckerberg rings the Nasdaq opening bell from Facebook headquarters in Menlo Park, Calif., May 18, 2012.   (AP Photo/Nasdaq via Facebook, Zef Nikolla, File)

Facebook had a disappointing first day on the market, so much so that Dana Blankenhorn of TheStreet is calling the relatively cheery media coverage surrounding it "one of the great frauds in American history." Blankenhorn's reasoning: "If I can barely sell 15% of something at $38 a share, if I have to lay out millions-upon-millions of dollars to prop up that price for a single day, what makes you think I can sell the rest of it at … anything like that price?" Other pundits weigh in:

  • So with IPO hype dying down, is Facebook a good buy? "The short answer is no," writes Eddy Elfenbein of Crossing Wall Street. "The long answer is noooooooo." Using fairly optimistic numbers, he pegs Facebook's actual worth at about $33 per share. Remember, "no company has ever gone public because they thought their share price was too low."
  • But Dan Scholnick of TechCrunch thinks the lack of a day-one "pop" is a good thing—it means Facebook "got the best deal it possibly could," instead of giving up value to bankers. If you bought Facebook stock as a long-term investment you should be happy; if you bought it for short-term gain, you're just engaging in "a high-class form of gambling."
Those gamblers may be regretting their bet; Facebook shares fell more than 12% in the first minute of trading today. (More Facebook stories.)

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