Ángel Franco/The New York TimesHendrata Susanto, snapping photographs of Nasdaq, said he hopes to be able to purchase Facebook stock.Investors may have really wanted to like Facebook on its first day as a public company, but it appears many have changed their minds.
Shares in the social network opened at $42.05 a share on Friday morning, up almost 11 percent from the company’s initial public offering price of $38. At that level, Facebook was valued at about $115 billion.
However, shares in the company began tumbling soon afterward, repeatedly testing the offer price as a floor. Buying by Facebook’s army of bankers could keep the stock from falling even further.
Others in the wave of big Internet I.P.O.’s experienced substantial bumps in their market debuts as well. LinkedIn, the first to go public, nearly doubled its offering price by opening at $83 a share. Groupon leaped 27 percent in its opening bid, at $28 a share.
While spectators may be thrilled by the prospect of a gigantic “pop” on the first day of a stock’s trade, the companies themselves and their underwriters are more likely to feel aghast. The 84 percent spread between LinkedIn’s initial offering price and its opening bid means that investors in the professional social network left a lot of money on the table.
That isn’t to say that companies and banks don’t want to see a pop at all. Underwriters generally build in a small discount when pricing an I.P.O., to attract investors on the first day of trading and make sure that there’s ample liquidity. In general, the aim is to get a pop of up to 10 percent.
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