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Facebook IPO weakens at close of first day of trade

posted 18 May 2012, 14:21 by Mpelembe   [ updated 18 May 2012, 14:22 ]

Historic Facebook IPO is marred by trading glitches at the Nasdaq. During the close, shares fall to the IPO price. The Nasdaq is expected to investigate trade execution issues.

NEW YORK CITY, NEW YORK, UNITED STATES (MAY 18, 2012) (REUTERS) - For a company that is dramatically upending business strategies and social relationships around the world, Facebook Inc. made a surprisingly modest debut on the Nasdaq on Friday (May 18) as a sky-high valuation and trading glitches capped the stock's rise.

Shares of the social networking giant were volatile in the busiest day ever for a trading debut. After early gains of more than 10 percent, Facebook shares fell back to the $38 (USD) issue price, ending up just 0.6 percent at $38.23. It was the Nasdaq's most actively traded stock, with more than 566 million shares traded.

Facebook had priced its IPO at the top end of its target range and increased the size of the offering, becoming the first U.S. company to go public with a valuation greater than $100 billion.

Facebook founder and Chief Executive Mark Zuckerberg, 28, who retains voting control of the company and whose personal net worth is now about $20 billion, marked the moment at the company's Silicon Valley campus by symbolically ringing the opening bell for stock trading on Friday morning.

Outside of Nasdaq headquarters in New York, crowds also gathered, even as exchange officials struggled to sort out technical problems related to the huge volume of orders, which delayed the start of trading in the stock by 45 minutes and left investors guessing for more than two hours about whether their buy and sell orders had actually been executed.

Assuming the underwriters exercise a greenshoe option as expected, Facebook's IPO is set to raise $18 billion, the second-largest amount in U.S. history, and by far the largest ever for a U.S. Internet company.

The shares attracted interest from investors of all stripes, reflecting the social network's extraordinary growth and deep store of information about its 900 million users. The IPO minted thousands of new paper millionaires among Facebook's 3,500 employees -- and a handful of billionaires among its founders and early investors.

But the stock debut took place in a weak market, and traders said the smaller-than-expected first-day pop reflected the very aggressive pricing of the offering and a last-minute, near 25 percent increase in the number of shares being sold. Analyst predictions of first-day gains had ranged from 10 percent to 50 percent.