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Why Facebook (FB) IPO Couldn’t Match The Hype

|Includes: Facebook, Inc. (FB)

It was surely one of the most highly publicized IPOs in history. It was one of the reasons that, on Friday, when Facebook shares went out to the world, and share price closed at an unexciting $38.06, the party was largely already over. Bidding had long since catapulted Facebook into the stratosphere, driving its paper value higher than some analysts think the company will ever be able to justify. It perhaps makes little difference to the average investor, someone who was never invited to this particular party anyway. This was a game that was being played mostly by long-standing insiders, and yesterday was more of a payoff day than anything.

And you have to consider the IPO's timing. Given the state of the U.S. and world economy, there's even less to be excited about, unless you think that perhaps unemployed Europeans will spend more time on Facebook because they don't have anything else to do. Moreover, the fact that giant IPOs such as this can generate enough volume to overpower computers responsible for processing the trades, causing significant slowing and frustrating would-be investors, is another problem. Many things have changed since the market crash of 1987, a disaster that many feel was fueled at least in part by glitches in the still struggling field of computerized trading, but there are still significant weaknesses to overcome that don't show up until unusual volumes or other factors collide. Some firmly believe that such dependence upon electronics (think computer dominated NASDAQ) is like living in a house of cards, and that someday there will indeed come the perfect storm.

What all of this says about Facebook the company is less clear. It's easy to discount the hype surrounding an IPO, but, like it or not, Facebook, according to the New York Times, points to more than 800 million active users around the world, with roughly 200 million in the U.S. The future value of that is not so easily discarded.

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