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Why that flat Facebook IPO isn’t so bad after all

May 28, 2012 • Business


FILE – In this Friday, May 18, 2012 file photo, passers-by are reflected in the window of the Nasdaq media center as they view reports of trading activity on Facebook’s stock on the Nasdaq stock market in New York. The botched offering of Facebook stock has raised several troubling questions, but at least we don’t have to worry about the one that plagues most IPOs: How is it that a few select investors were able to pocket obscene profits on a surge in the stock in just a couple of hours? A look at a history of “pops,” and why Facebook’s flat debut may not be so bad after all. (AP Photo/Bebeto Matthews, File)

NEW YORK (AP) — The botched offering of Facebook stock has raised several troubling questions, but at least we don’t have to worry about the one that plagues many IPOs: How are a few select investors able to buy in early at lower prices and then pocket huge profits when the trading frenzy begins?

Among the many apparent missteps in its public debut, Facebook is accused of setting an opening price that was too high. Instead of spiking on the first day, shares inched up just 23 cents, to $38.23. The stock has mostly fallen since.

But some IPO experts don’t think this was problem at all.

“The debacle was not the IPO but all the whining by speculators who didn’t make money,” says Lise Buyer, who helps companies plan initial offerings. Says Jay Ritter, a finance professor at the University of Florida, “Selling something for what it’s worth is the way most people think a market should work.”

For all its flaws, the Facebook debut did fulfill the chief purpose of a stock offering— to raise money for a Login to read more

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