Facebook IPO: From Hype to Reality

When Facebook announced it was going public, it did so in the company’s traditional fashion: go big or go home.

Coming in at $16.01 billion, it had a place in the record books as the largest Internet IPO in history. That’s a lot of money, so naturally there was a lot of hype. A lot.

Unfortunately for Facebook, the stock’s tumultuous performance hasn’t lived up to the hype. Not helping the situation is market speculation about the social network’s inability to snag ad revenue as its audience increasingly moves to mobile usage.

CEO Mark Zuckerberg soothed some worries this week as his decision to not sell any of his shares for a least a year went public. He has the option to do so on Nov. 14.

But even though the stock closed at $18.58 that day, a 5 percent jump, it was a far cry from the $38 it was first offered at on May 18. And as early investors are now becoming eligible to sell their stocks, fluctuating prices are expected to continue.

So, that’s where we’re at now. But how did we get here? Here’s a quick look at key dates in the history of Facebook’s historic IPO:

Feb. 1, 2012: Facebook unveils its IPO plan as part of a regulatory filing.

What happened in between: Facebook announced it planned to buy Instagram, a wildly popular photo-sharing site, for $1 billion in cash and stock. Despite a jump in revenue, the company’s net income falls as expenses are weighing it down. Platform announces new advertising opportunities that allow brands to have their message mixed in with users’ status updates and photos.

May 3: IPO price range is announced as $28 to $35.

What happened in between: Analysts say the company is valued too highly. Responding to concerns over privacy, Facebook makes policy changes to tie up some loose ends on how the company uses information shared by its users. Hype machine is raging on company’s IPO, so FB responds by adding 84 million shares.

May 18: Stock market opens for the first time with FB on the books. IPO price opens at $42.05 per share and closes at $38.23. More than 500 million shares are bought and sold.

What happened in between: On its third day of trading, Facebook’s stock price falls below its IPO, in large part due to analysts reducing revenue projections. Company wants to consolidate the 40-plus lawsuits it’s facing. Facebook says Nasdaq’s botched its stock opening and should share the blame for its less than stellar performance. The Securities and Exchange Commission is now investigating. First earning reports released in July show revenue up, but the company had a net loss of 8 cents per share.

Aug. 16: Some early investors become eligible to sell shares, causing another drop in stock prices. By market close the next day, shares fall to half their IPO price.

What happened in between: Facebook updates its mobile app. Some early investors are offloading shares and some are keeping them. Both cause price fluctuations. Instagram deal gets green light and soon inked at $740 million in cash and stock.

So, we’re back to where we started. Don’t think early investors are sunk just yet. Even though FB has seen a fairly sharp drop in market value since its IPO, the early investors still stand to make a pretty penny by selling at the current price. That’s what has many still worried and speculating an unpredictable future as this next set of dates arrive.

Here’s the schedule of the number of shares to be released for sale, as reported by Facebook in regulatory filings:

Oct. 29: Facebook employees become eligible to sell their shares. Could flood the market with 234 million additional shares.

Dec. 14: More early investors eligible to sell, opening another 156 million shares.

Stay tuned …

Thanks for reading,

Drew Larison