Facebook falls flat in market debut

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Facebook shares stumbled on Friday, managing a gain of less than one per cent in the first day of trade, dampening optimism over the much-anticipated debut for the world's biggest social network.

The shares, priced at $38 on Thursday in the largest-ever initial public offering (IPO) for a tech firm, eked out a gain of 0.61 per cent to end at $38.23, with record volume of more than 550 million shares.

The shares jumped 12 per cent to $42.55 in the opening Nasdaq trades but within minutes fell back to the offering price.

A midday rally pushed the price back up but just ahead of the close the price fell back to $38.

Skeptical investors?

"The negativity in the market overall has put a damper on the IPO," said Darren Hayes, a Pace University professor and former investment banker.

"It's not uncommon in an IPO to see a big rise and then for the price to come back down, but I'm a bit surprised (by the market action) after all the hype."

"I think there may be some skeptical investors who see some challenges in the long-term outlook of the company."

Gerard Hoberg, an economist at the University of Maryland said there was enthusiasm from some buyers but skepticism from professionals.

"What I think is going on is you have a lot of bullishness from retail investors, people who use Facebook, and there's a lot of those investors creating a lot of buying pressure," he said.

"But professionals who were looking at the numbers behind Facebook had a lot more doubts, and that is cooling the issue quite a bit."

‘Not a disaster yet’

Hoberg said the market introduction "is not a disaster by any stretch, and you also could say that the Facebook owners are quite pleased because they didn't leave a lot of money on the table. But it will not be a pleasant taste in people's mouths if Facebook falls below $38 anytime in the near future."

A report on the Business Insider financial blog said the price did not fall below $38 because of a large number of standing orders at the offering price. The Wall Street Journal said the underwriting investment banks also stepped in to support the price.

Lou Kerner of the Social Internet Fund said the market action suggests the IPO was correctly priced.

"The company raised a ton of money, lots of early investors, employees, and founders were able to monetize shares, and it's trading up a little, so the new investors did OK," he said.

James Hughes, chief market analyst at London's Alpari said, "The real value of Facebook is not likely to be known until the hype of the IPO has died away and investor have been able to digest how the company is going evolve to be the money-making machine many expect it to be."