Facebook price little changed at market close - New York News | NYC Breaking News

Facebook's IPO splutters as bankers struggle to prevent first day loss

Facebook took eight years to stage one of the most anticipated initial public offerings ever. The anticlimax came Friday, as Wall Street bankers struggled to prevent the stock from ending its first day with a loss.

The stock had been widely predicted to soar on its first day. Instead, up until the closing moments of the trading session, Facebook's underwriters battled to keep it from slipping below its offering price of $38 a share. Such a stumble would have been a significant embarrassment, particularly for a prominent new issue like Facebook, the most heavily traded IPO of all time.

In the end, the bankers succeeded. When trading on Nasdaq ended at 4:00pm, the social network's stock was up just 0.6 percent at $38.23.

The roller-coaster day -- Facebook's shares started out jumping roughly 11 percent, before cooling off -- was also beset by trading glitches and a 30-minute delay in the opening of trading. Nasdaq OMX Group Inc. did not respond to requests for comment.

Facebook was also hurt by investors' high expectations of a healthy first-day pop in the price, according to people familiar with the matter. When that pop did not happen, it prompted a selloff, these people said.

That is when Facebook's underwriters had to step in to support the company's share price, people familiar with the matter said. In particular, lead underwriter Morgan Stanley was assigned to be the deal's "stabilization agent" -- meaning it was the firm's job to keep the shares above the offering price, these people said.

In that role, Morgan Stanley was forced to buy Facebook shares as the price slid toward $38 in order to prevent the price from crossing into negative territory.

Facebook's price began falling almost immediately after shares began trading. It is unclear exactly when Morgan Stanley stepped in, but traders said that the price movements throughout the day, with the shares occasionally touching the IPO price but never crossing below it, suggested the firm was active throughout much of the session.

Facebook's opening-day travails suggested how tough it can be to live up to high expectations in the market.

"There's been way, way too much hype, so it may be impossible not to have it be anticlimactic," said Peter Falvey, managing director of the Boston-based investment bank Falvey Partners LLC.

The stock's humble rise was far below the first-day performance of other companies that raised $5 billion or more in their IPOs, such as United Parcel Service, which experienced a 36 percent first-day pop in 1999, according to Dealogic. Some web-company IPOs over the past year, such as the social network LinkedIn, more than doubled on their first days.

Still, at a market capitalization of nearly $105 billion by day's end, Facebook took its place among the nation's corporate giants. Its stock market capitalization makes Facebook bigger than computer firm Hewlett-Packard, and puts it in the same league as PepsiCo.

At Facebook's headquarters in Menlo Park, Calif., the mood was celebratory, according to people on the company's campus. Chief executive Mark Zuckerberg, who founded the company from his Harvard dorm room in 2004 and who is now worth $19.25 billion, rang the Nasdaq opening bell from there early Friday morning amid a gathering of around 2,000 employees.

Flanked by chief operating officer Sheryl Sandberg, Zuckerberg told the crowd to remember the IPO was just one day.

"Going public is an important milestone," said the 28-year-old, sporting his trademark hoodie. "But here's the thing. Our mission isn't to be a public company. Our mission is to make the world more open and connected."

Once the stock opened, trading was robust. More than 200 million shares changed hands in the first hour, as investors rushed in to buy, and some who had received stock from the IPO cashed out. By day's end, 571 million shares traded hands.

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