It was supposed to signal a new era: Social media meets Wall Street. It was the launch of the initial public offering (IPO) of the stock of Facebook (NASDAQ: FB). On May 18, 2012, its Founder and Chief Executive Officer (CEO) Mark Zuckerberg rang the opening bell of NASDAQ, but the sound heard round the world was the gnashing of teeth of its new investors who were at the mercy of a defective system.
The IPO’s opening day was a disaster. In the words of the Christian Science Monitor, “one of the most botched IPOs in US history,” and not only for the faulty mechanics behind trading. The share price sank quickly, and “investors weren’t convinced Facebook could translate all its online activity into a big revenue stream,” according to the newspaper.
One year later and wiser
One year later, not only have investors’ attitudes toward IPOs changed, new computer systems and measures have been put into place to prevent the problems that occurred at NASDAQ. Facebook has also shown some improvement and, thankfully, listened to some of the analysts who noted that the company needed to hitch the social media site’s revenues to the rise of mobile usage.
Still, as noted by MarketWatch, investors still find themselves asking “whether the glass is half-empty, or half full.” If value is judged by the share price, it still remains about a third off its initial launch price of $38 at $25.66 in May 2013.
Improvement in the mobile market
There have been changes at the company, most notably the drive to improve the company’s mobile experience and increasing revenues from mobile ads. Notes the Christian Science Monitor, “The company reported that, in less than a year, about 30 percent of its total ad revenue – some $375 million in the first three months of 2013 – came from mobile ads.” And stock analysts predict this growth is likely to continue in the near term.
Stock price still below IPO
With improvements in its mobile capabilities has come an attendant improvement (up some 50 percent) in its share price since bottoming out last fall, according to MarketWatch. There still are mixed feelings, however. Only about half of investment analysts rate FB a “buy.”
It’s clear that doubters remain wary of the stock. Says Stock Analyst Michael Pachter, “Facebook’s share price is telling you that investors are more skeptical about the company’s prospects than a year ago.” But another analyst‘s take is, “Shouldn’t you be looking at why it is 40 percent higher than its lows?” Back to that old question of how the glass looks.