By Kim-Mai Cutler
The underwriters of Facebook’s (FB) $16 billion debut on Nasdaq fought to the finish to keep the company’s shares above last night’s final price of $38 a share. Shares closed at $38.23 today. Sources tell us that the syndicate of banks underwriting the deal have been putting in buy orders to keep its price afloat. It’s not necessarily a bad outcome for Facebook as the company didn’t leave any money on the table, but bankers are sure to be unhappy. Plus, the company’s tepid premiere is killing the performance of tech stocks across the board.
Basically, what we hear is that the underwriters including Morgan Stanley, JPMorgan and Goldman Sachs, just got too aggressive in the final days before the IPO about pricing. Earlier this month, the company was slated to open at a $28 to 35 price range, but that range was pushed up to $34 to 38 a share. Then Facebook priced at the very high end at $38 last night.
“The only thing keeping it at $38 are support mechanisms,” a source tells us. “There just wasn’t the institutional investor demand that people thought there would be.” They added that about 20 percent of buying orders seem to be coming from retail investors (e.g. regular people), which is “unprecedented.”
Because prices are being held up to avoid a negative finish, shares might dip lower into early next week. Already, we’re seeing the impact on other stocks across the board. Zynga (ZNGA) is down 13.4 percent to $7.16. LinkedIn (LNKD) is down 5.9 percent to $99.02. “They’re all in the sh*tter because now they look expensive since Facebook didn’t go anywhere,” we’re told.
From Facebook’s perspective, the company shouldn’t care. The company and its early shareholders raised $16 billion at the very best price they could, leaving no money on the table for the underwriters’ wealthy clients to scoop up and sell for a quick profit.
Indeed, CEO Mark Zuckerberg has warned investors from the very beginning that Facebook was originally not meant to be a company. He even said today before the market opened, “Going public is an important milestone in our history. But here’s the thing: our mission isn’t to be a public company. Our mission is to make the world more open and connected.”