The most eagerly awaited initial public stock offering in a
long, long time fizzled Friday. The apparent culprit: simply too many shares
foisted upon the public, Barrons reports.
Facebook's 421-million share debut ended up just 23 cents
above the offer price of $38, after the deal had priced at the high end of an expected
range of $34 to $38 the night before. It closed 9% below the $42.05 at which it
had opened. It was that rarest of creatures: a hot IPO with no "pop."
While most people had been focused on the price—and the
sky-high valuation it implied—some observers said after the fact that Morgan
Stanley and the other underwriters simply had sold too many shares (ticker:
FB), removing the rarity factor and spooking individual investors.
"I think what happened today is that the underwriters
and the company misjudged market demand, and there were too many shares,"
says analyst Michael Pachter of Wedbush Securities, who has a Buy rating on
Facebook, and a $44 price target. Pachter knows investors who got 50% more of
the shares than they had requested. "That made them nervous," says
Pachter. "They figured: 'Oh, there must not have been as much
demand.'" As a result, such investors sold the stock when trading opened
at 11:30 Friday morning....
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