Facebook IPO’s Poor Performance Blamed On SoftwareBy: Zach Walton - May 21, 2012
Friday started out pretty exciting as Facebook shares started trading. The feelings of joy soon turned to disappointment, however, as Facebook’s share price never really went anywhere. The question then turned to what caused the poor performance.
To help answer that question, Nasdaq CEO Robert Greifield took to a conference call yesterday to clarify what exactly went wrong on Friday. Bloomberg reports that Greifield blamed the poor performance on the software used to power the computers that were doing the trading.
The main problem seems to have started occurring after Morgan Stanley sold 421 million shares of Facebook Thursday night. The trade request apparently disturbed the auction process and threw everything into a loop. Nasdaq had to intervene to get the auction rolling at 11:30 a.m.
The mix up had Nasdaq ending up with 5,000 shares of Facebook. They sold those shares for $10 million but are asking for permission to use the money to repay investors that never received their shares on Friday.
It would appear that underwriters kept the share price from falling below $38 on opening day. If it had dropped below $38, it would have been disastrous for first day trades. The less than stellar first day already knocked Zynga’s share price down to little below $8, so it’s painful to imagine what a worse day for Facebook would cause.
Regardless of Facebook’s poor performance on Friday, Nasdaq still saw a lot of action thanks to the company. Bloomberg calculated the numbers and found that Facebook shares traded 582.5 million times on Friday. That number accounted for 6.6 percent of total U.S. exchanges.
It’s pretty obvious that Facebook is going to remain a hotly traded company for the months, and hopefully years to come. It has already attracted the largest number of individual investors ever and it’s going to be really popular with a lot of people.
I think that Facebook is one of those companies that people have a lot of faith in. If the problems didn’t plague its opening day on the markets, I’m sure Facebook would have closed much higher than it actually did. I would say that it’s not yet fair to count Facebook out. We should give it the rest of this week to see how well it does.
Facebook is currently trading for $34 per share. It’s been slowly climbing since I began writing this, so we’ll keep watching for any major changes. We’ll let you know if Facebook rises to the top of the mountain or sinks beneath the sea. Either way, things are just starting to get interesting.