1. Facebook IPO: Even before its stock began trading on the NASDAQ exchange last May 18, analysts had been sounding warnings that Facebook’s long-awaited initial public offering might be over-hyped. The world’s best known social network, with more than a billion users, was running out of people to sign up and it wasn’t as successful as Google in monetizing its content, especially on mobile devices, some said. But few were expecting the disaster that ensued. Initially floated at $US38 — potentially about $100 billion in overall capitalization and raising $16 billion on initial sales — Facebook shares experienced only a tiny opening bump (about 23 cents) before beginning a long slide from which they’re only beginning to recover. At one point last summer they were as low as $18.
Predictably, the fiasco has degenerated into legal battles (more than two-dozen class actions by late September) amid allegations the stock had been overpriced while its underwriters were making depressed earnings forecasts. The IPO still made Facebook founder Mark Zuckerberg and his partners very rich. But the disaster was a lesson to small investors and entrepreneurs alike that web buzz aside, market fundamentals matter.
Predictably, the fiasco has degenerated into legal battles (more than two-dozen class actions by late September) amid allegations the stock had been overpriced while its underwriters were making depressed earnings forecasts. The IPO still made Facebook founder Mark Zuckerberg and his partners very rich. But the disaster was a lesson to small investors and entrepreneurs alike that web buzz aside, market fundamentals matter.
