Facebook closes just above $38 IPO price

Facebook CEO and founder Mark Zuckerberg took the social networking company public on Friday but the stock price closed just barely above its IPO price as stock markets closed.

As many people looked for a big first-day pop in its share price, the 0.05 per cent increase, at $38.23 US was somewhat of a letdown.

"It wasn't quite as exciting as it could have been," said Nick Einhorn, an analyst with IPO advisory firm Renaissance Capital. "But I don't think we should view it as a failure."

Indeed, the small jump in price could be seen as an indication that Facebook and the investment banks that arranged the initial public offering priced the stock in an appropriate range.

It's also a supply and demand issue. Facebook offered nearly 20 per cent of its available stock in the IPO, so there was enough to meet demand.

In comparison, Google offered just 7.2 per cent of its stock when it went public in 2004 - and rose 18 percent on day one.

The day was also a letdown for other internet stocks, perhaps because investors sold out and switched into Facebook.

Game-maker Zynga Inc. fell 13.4 per cent to $7.16, professional networking site LinkedIn was down 5.7 per cent at $99.02 and Groupon, which offers its website subscribers daily coupon deals, fell 6.7 per cent to $11.58.

Facebook raised at least $16 billion in selling 421 million shares at $38 apiece on Thursday. 

On Friday morning when markets opened, average investors got their first chance to own a piece of the website that boasts more than 900 million members. At its $104-billion valuation, Facebook is the largest U.S. company to ever go public. 

Its shares started trading on the Nasdaq Stock Market about half an hour late, at 11:30 a.m. ET, after a computer glitch. Nasdaq said it had trouble delivering trade execution data related to the IPO.

When they did start changing hands, the shares were going for $43 — $5 or more than 10 per cent above the IPO price. The shares then slid lower, and within 10 minutes of opening, were down to $40, a five per cent gain from the IPO price.

Just before noon eastern time, Facebook was hovering barely above the IPO price of $38 before starting a modest climb to seesaw around the $41 level through much of the afternoon.

Late in the trading session, Facebook shares again started losing some of their steam. They spent much of the last half-hour of trading exactly at the $38 level without ever going below.

More than 510 million Facebook shares have traded hands on Friday, a record for the number of shares traded on the first day of trading for a U.S. company. The most hotly anticipated initial public offering of recent memory, the stock is trading under the symbol FB.

From the company's Menlo Park, Calif., headquarters, Zuckerberg remotely rang the bell to open the stock exchange in New York early Friday, but Facebook shares themselves didn't start trading until 11:30 a.m. ET.

The shares were supposed to trade hands at 11 a.m. ET but a trading delay at Nasdaq put the big moment behind by 30 minutes.

Highly touted IPO

Many investors remain keen to get their hands on the stock, but it's questionable whether the company can live up to its hype.

Data released this week suggested the ratio with which Facebook users click on the ads they see on the site is significantly lower than the ratio other web companies see. Online ad company Wordstream estimates Facebook's click ratio is 0.051 per cent, whereas at Google, it's as high as 0.4 per cent.

This week, the world's largest car company, GM, announced it would stop spending the $10 million it currently spends on Facebook ads, preferring to use those funds elsewhere — a concerning development for a company on the verge of an IPO.

Still, Facebook has already fared better than many of its online rivals in that it already makes money. The company earned $205 million in the January to March quarter, on revenue of $1.06 billion. In 2011, Facebook pocketed $1 billion in profit.