FACEBOOK IPO DISAPPOINTS INVESTORS

FB Stock Closes Up Only 21 Cents

 By Dock Walls

May 17, 2012

The trading day started late for the much-anticipated Facebook Initial Public Offering (IPO). Initially, the volume rate was lower than expected. The FB stock did not perform as well as Underwriters anticipated. Investors nervously monitored this less than auspicious stock event.

Adding to the drama, Zynga, a company that provides Facebook a platform for online games, halted its stock trading after a 13% drop. Apparently, a circuit breaker was triggered to stop the slide.

Nonetheless, the Facebook IPO has certainly presented a great opportunity for the rich and well-to-do to improve their bottom line. On May 17, 2012, Facebook sold more than 420 million shares for $38 each. On May 18, 2012, those with at least $500,000.00 in their portfolio could immediately purchase shares of Facebook. Most of the day, FB stock hovered around a paltry $39. At the closing bell, it was at $38.21.

Had average loyal Facebook users who were eager to purchase FB stock been allowed to invest, they might have suffered devastating losses. Fortunately, Financial Industry Regulatory Agency rules, adopted in 2010 and implemented in September 2011, which prohibit so-called “market rules,” may have prevented those individual investors from losing money. Pursuant to these rules, Nasdaq member firms could not honor buy requests to purchase at the best available price until after trading had begun. In this instance, these rules intended to avoid massive fluctuations in the price of minted stocks, performed as designed and protected investors.

At the start of the FB IPO trading, limit orders, which require investors to buy or sell a stock according to specific minimum or maximum prices, were in effect. A buy limit order may be executed only at or below the limit price, whereas a sell limit order may only be executed at or above the limit price. There are no guarantees that a limit order will execute as such orders are not filled until the market price of that stock reaches the limit price. These stringent rules ensure that investors pay no more than the pre-set price for a stock.

Once trading of Facebook stocks began across all 13 of the U.S Stock Exchanges, average individual investors were free to purchase the stock. However, by then, it was apparent that things were not going well. Traders such as the Goldman Sachs Group, mutual fund managers and other professional investors began to sell but not at huge profits.

Despite the slow start, Facebook broke the record for trading volume, surpassing General Motors and American Express.

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