By Joshua Ostrer
Heard of Facebook?
You know, that social networking giant that has completely dominated its field, currently boasting a membership of 901 million users?
Well, on May 17, Facebook, Inc. held an initial public offering in the New York Stock Exchange.
Facebook’s stock price was valued at $38 a share. The $38 value is the third largest IPO in history, trailing only Visa and ENEL, and the biggest ever for a technology company.
However, that $38 evaluation sets very high expectations for Facebook’s future.
“A $104 billion market capitalization puts Facebook at more than 100 times its trailing earnings.
That’s a big multiple to live up to, and it will likely need to add bold new revenue streams to justify the mammoth valuation,” said John Constine and Kim-Mai Cutler of TechCrunch.
Mark Zuckerberg remains confident in Facebook’s ability to grow.
“There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future,” said Zuckerberg in his IPO S-1 letter (a letter sent to describe Facebook’s purpose before its listing on the stock market).
When the big day finally came for Facebook to officially begin trading on May 18 there was no shortage of storylines.
Every element of Facebook was suddenly under a large amount of particularly critical scrutiny.
Many Wall Street analysts even questioned Zuckerberg’s ability to lead solely due to his choice to wear a hoodie rather than a suit to the New York Stock Exchange.
However, the big day was a busy one. Facebook raised a record $16 billion in its first day of trading. Facebook also set a record for trading volume at 460 million shares traded in its first day.
While trading began at $42 a share, Facebook’s stock sank slightly and closed out its first day at $38.23.
However, now many are blaming the lack of a stock price increase on NASDAQ (National Association of Securities Dealers Automated Quotations), the American stock index, because they have since apologized for problems with their system which may have lost as much as $100 million in bad trades.
NASDAQ has already announced it will be reimbursing investors $13 million.
What effects will Facebook’s listing on the NASDAQ have?
While mostly in debate, many believe that Facebook will either have to push increased advertising on its users or discover new means to acquire revenue.
The listing has turned many Facebook employees into millionaires and has made Zuckerberg himself an estimated $110 million, increasing his estimated personal wealth to $19.25 billion by Friday’s end.