Saturday, May 19, 2012

Friday Surprise

We are all familiar with the phenomenon of the “Friday surprise”, when politicians do something outrageous or reveal embarrassing information, late on Friday, so as to escape the news cycle.  By the time Monday morning rolls around, it’s old news.  In fact, with any luck, something dramatic will have happened over the weekend, somewhere in the world, and the news will be buried.

Now, Facebook faced a trickier problem with its IPO.   By no means should the event be hidden;  it had to be hyped to the skies, to have a big First Day.   The longer-term prospects, however, are murky;  the profits they project that could justify future rises above the launch price  in a timely fashion, seem to be predicated on the idea that FB will soon be bought out by ill-advised trillionaires from Mars.  So, if the launch had been scheduled for Monday, and the share price sank on Tuesday or Wednesday below the initial offering, that in itself would become a big story, the bigger the more they hyped the offering.
So:   Launch Friday, with much fanfare.   Clash the cymbals and blow the horns.  And indeed, at first, the price did rise -- this seems to be a law of physics for much-hyped IPOs, something to do with Archimedes. 

Hmm... Just as I predicted...

But then, the balloon began running out of air, before the close.   Trading was halted;  then resumed, with underwriters buying in shares, to keep the price up above embarrassment.   At close of trade, a bunch of clever rascals went home much richer men, and the hordes of the ever-hopeful had something to Twitter about. 

Right now, a handful of insiders are hoping that something spectacular will happen this weekend -- a volcano erupts in downtown Los Angeles,  Romney flees to Azawad,  giant mole-rats ravage downtown Chicago.  Then no-one will notice if, next week, FB tanks.

[Update, Monday, 21 V 2012] "Stocks Surge Broadly ... Facebook Shares Slump." (NYT)
[Update, Thursday 24 V] Toleja so:,0,7291741.story

Also, be sure to check out James Surowiecki in this week's New Yorker, on why the shares you bought are not actually the same as the ones the grown-ups got, but more like sort of play-shares.

[Update 26 July 2012]

In first earnings report since IPO, Facebook’s profit margin narrows
Marketing costs surged for the social media company, a sign that it’s chasing growth.
[Update 2 August 2012]
"Facebook’s stock price reached a new low Thursday as shares of the world's largest social network fell below $20 for the first time, down by nearly half from its $38 initial public offering price."

[Update 25 January 2016]  And in other news…

Twitter announced a major shakeup late Sunday, as several top executives have left the company …
A major outage last week sent the stock way down, to $17.73 -- far below its initial public offering price of $26 per share.


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