Facebook IPO stumbles: Why didn't it wow investors? (+video)
The Facebook IPO underwhelmed Friday, closing up only 23 cents. Investors are still debating Facebook's worth: Is it must-own stock or a company with limited growth potential?
It's finally official: Facebook is a publicly traded company, and investors in its newly listed stock now own some 421 million shares in the company that has come to define social networking in the online world.
Or, in Facebook jargon, the company has been "friended" by Wall Street.
Shares in the initial public offering (IPO) had an offering price of $38 per share. After trading at times above $42, the price closed at $38.23 Friday – a closing level buoyed by purchases coming from the IPO's own Wall Street underwriters, according to news reports.
So this wasn't the strong showing many analysts had expected, which raises the obvious question for investors: Where is this stock headed?
Skeptics argue the company's staying power and profit potential have been overhyped, while fans see it as the world's must-own social media stock. It may take a while to know which side is right.
On the "buy" side of this debate, Facebook has unrivaled clout in its market, with roughly 1 in 8 people on the planet using the site to swap photos and information. More keep signing up every day. That's a platform of activity that the company can monetize through advertising revenue and add-on services.
The negative view is that all that may be true, but it may not justify the company's current market value on Friday of close to $100 billion. After an extraordinary growth surge since its founding in 2004, Facebook is now gaining customers and revenue at a decelerating pace. If future growth doesn't come in strong, the share price could easily go down rather than up.
The tug-and-pull between those views seemed evident Friday. There was enthusiasm enough to push the stock above its offering price, but skepticism was strong enough to keep it from soaring.