Wednesday, May 30, 2012

Worst IPO In A Decade? Really?

That's what they're saying about Facebook's initial public offering:

The social network has lost more than a fifth of its value since its faltering Wall Street debut on May 18, while its 28-year-old founder Mark Zuckerberg has been honeymooning in Rome. It is now unlikely to recover in the short term, analysts claimed.

After placing at $38, Facebook’s shares briefly peaked at $45 before sinking back to $38.25 on their first day of trading. They have fallen every day since then, and today plummeted nearly 10pc to a low of $28.84 at the close in New York

Well, that's poor performance, to be sure.  But it's part of a trend to over-value companies that don't actually do much, or actually create anything, that just...are.  One would think after the tech crash of 2000, our banking betters might have learned something.

But the worst in a decade?  Either our economic experts have the same short-term memory damage as those investing billions in yet another internet-based company, or they are selectively forgetting an even bigger stock bust on an equally hyped IPO, from less than two years back..  November 17th, 2010:

General Motors Co GM.UL pulled off the biggest initial public offering in U.S. history on Wednesday, raising $20.1 billion after pricing shares at the top of the proposed range in response to huge investor demand.

GM sold 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.

Including an option that would allow underwriters to sell more shares, expected to be exercised in coming days, GM looks set to raise $23.1 billion -- the biggest initial public offering ever.

The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy in June 2009 with sharply lower costs and higher profit potential.

The U.S. government's stake in GM will drop to about 33 percent from 61 percent if all available shares are sold.

So where is GM stock opening today?

Yeah, that's a 31% decline, greater than Facebook, with declines having reached as much as 43% when the stock dropped to $19.  The strong IPO, heralded at the time as a harbinger of GM's return to prominence and as a down-payment on the repayment of the company's debt to the American people have proven to be neither:

The stock price will need to rise by 47 percent to $48.58 for the U.S. government to break even on its follow-on stock sales.

Never going to happen.  And it's the US taxpayers, whose money allowed GM to stay afloat, who will never see a return on their investment.

Holders of vast quantities of GM stock bought at the IPO price will tell you not to worry, that the company is essentially a public trust, and will not be allowed to fail.

I'm not sure if President Romney, an expert in these matters, will feel the same way.

Sorry, Facebook haters and media naysayers.  But you've got a long way down still to go if you want to reach the failure levels of the General Motors IPO, underwritten by Barack Obama with the money of the American people....

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