On May 18, 2012, the social networking giant Facebook (FB) entered its massive initial public offering of 421,233,615 shares of its common stock at a price to the public of $38 per share. Morgan Stanley, JPMorgan, Goldman, Sachs & Co., BofA Merrill Lynch, Barclays, Allen & Company LLC, Citigroup, Credit Suisse and Deutsche Bank Securities are serving as book runners for the offering. RBC Capital Markets and Wells Fargo Securities are serving as active co-managers.
The huge volume of Facebook trading caused the Nasdaq to delay the IPO for more than a half hour and also caused trade confirmation issues in various brokerage firms whether or not their trades on Facebook had gone through.
On the same day, a class action lawsuit was filed in a federal court in San Jose, California, against Facebook seeking $15 billion in damages, or $10,000 per member, for violating the privacy of its members. The lawsuit alleges that Facebook violated its members' privacy rights by tracking them even after they logged out. During late 2011, Facebook entered in a privacy agreement with the U.S. Federal Trade Commission to settle a case in which the agency accused the social network of engaging in deceptive privacy policies that caused users to share more information than intended.
Jon Leibowitz, the U.S. Federal Trade Commission's chairman, said:
Facebook is obligated to keep the promises about privacy that it makes to its hundreds of millions of users. Facebook's innovation does not have to come at the expense of consumer privacy. The FTC action will ensure it will not.
On Friday, Facebook share price went up as much as $45 a share and closed at $38.27 a share with 0.71% performance from its IPO price. Here are the other social media stocks that are plunged after Facebook's IPO.
LinkedIn Corporation (LNKD): LinkedIn is a professional network on the Internet and the first of the major social media companies to go public last May 2011. Linkedin has a market cap of 10.23B and it is currently trading around $99.02 with a Friday trading range of $96.60 - 109.50. On Friday, Linkedin shares went down by -5.65%.
Zynga Inc (ZNGA): Zynga is a provider of social game services and the company's games are accessible on Facebook, other social networks and mobile platforms. Zynga went public late last year at an IPO price of $10 a share and the stock went up $14.69 in March 2012. Zynga shares were halted twice on the same day since the stock hit a circuit breaker. Zynga has a market cap of 5.27B and it is currently trading around $7.16 with a Friday trading range of $6.40 - 8.79. On Friday, Zynga shares went down by -13.42%.
Groupon Inc (GRPN): Groupon is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount. Groupon has a market cap of 7.39B and it is currently trading around $11.58 with a Friday trading range of $11.33 - 12.50. On Friday, Groupon shares went down by -6.69%.
Yelp Inc (YELP): Yelp connects people with local businesses, which went public March 02, 2012. Yelp has a market cap of 1.11B and it is currently trading around $18.58 with a Friday trading range of $17.70 - 21.89. On Friday, Yelp shares went down by -12.65%.
Pandora Media Inc. (P): Pandora is an Internet radio service in the United States, which went public last June at $16 a share. Pandora has a market cap of 1.63B and it is currently trading around $9.77 with a Friday trading range of $9.73 - 10.60. On Friday, Pandora shares went down by -7.13%.
Renren Inc (RENN): Renren operates a real name social networking Internet platform in China. Renren has a market cap of 1.92B and it is currently trading around $4.93 with a Friday trading range of $4.82 - 6.38. On Friday, Renren shares went down by -20.99%.
Quepasa Corporation (QPSA): Quepasa is a social discovery service and owner of Latin American platform Quepasa and North-American platform myYearbook. Quepasa has a market cap of 111.25M and it is currently trading around $3.07 with a Friday trading range of $3.07 - 4.40. On Friday, Quepasa shares went down by -21.48%.
FriendFinder Networks Inc (FFN): FriendFinder Networks is an Internet and technology company providing services in social networking and Web-based video sharing. FriendFinder has a market cap of 45.52M and it is currently trading around $1.43 with a Friday trading range of $1.28 - 2.15. On Friday, FriendFinder shares went down by -16.37%.
Overall, Facebook entered its IPO at the wrong time, followed by a lawsuit on privacy issues that caused a drop in share price of Facebook and other social media stocks. Since Facebook is the social media giant, it will continue to play a significant role in other social media stocks and we will soon know whether investors "like" Facebook or not. We will better know the worth of Facebook shares after a couple of earnings results. I would recommend to wait for one or two earnings results to evaluate more details about this company for any long term investments.
Sources: Some of the data is taken from Google Finance, Finviz and investor sites.
Disclaimer: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research.
I change my positions very frequently and may initiate either long or short positions in the above mentioned stocks at any time.