There’s been a lot of noise lately about how the Facebook IPO was a failure, and from an investor point of view its had a rough start. But if you step into the shoes of the founders and start up investors, then the Facebook IPO was a huge success.
Think about it like this, if the stock sky-rocketed on the first day then the banks behind the IPO greatly undervalued the share and the founders and early investors sold out too cheaply. This didn’t happen with Facebook, the share went public and then it slowly started to dive.
The result of this dive is direct proof that the IPO was a success for the founders, it shows the stock was priced around the right price when it went public. Further to that the price was at such a high level it didn’t attract the normal kind of investors and IPO would attract.
You see, when a company the size of Facebook goes through an IPO generally a group of investors get in to profit on the initial price rise. Facebook didn’t allow this by increasing their price in the last few days, making sure that the profit gain from initial trade would not be high.
By doing this they attracted investors who were more long-term play investors, rather than investors who were looking for a quick profit. Now a smart investor would see this and start to buy Facebook shares now as you can expect it to be around for a long time and show solid growth.
Obviously the investors who took up shares in the IPO looking for a quick price jump are upset, but those who took Facebook as a long term play, they’re happily sitting back and watching the ride. So that makes at least 2 groups happy from this IPO, the founders and early stage investors and the long-term investors.
Now I know this is an alternative view to most people right now, but sometimes a great analyst is someone who can emotionally remove there selves from the situation and sit back and see what’s transpiring. Leave your thoughts below on what you think about the facebook IPO.