Markets

Facebook IPO Score: Zuckerberg 2, Wall Street 0

By Allan Roth

May 21, 2012 / 12:41 PM EDT / MoneyWatch

(MoneyWatch) Earlier today, I posted a piece arguing that the failure of Facebook's (FB) shares to pop on the first day of trading was a sign of success, in that the pricing was fair. After falling all morning, it looks like even more of a success for Facebook.

A stock has an initial public offering at a price the investment bankers think that they can sell to investors. Granted, most of the investors are really the best customers of the bankers. Initially, the price was set at $34 a share but the interest was so high, the price was raised to $38 a share and $16 billion was raised for the company.

As noon, it's looking like the $34 price was closer to fair value. This means that Facebook raised an extra $1.7 billion over its current fair price. That's a transfer of money to those who owned pre-IPO shares (Mark Zuckerberg is by far the largest) from investment bankers and their insiders who bought the new stock on Friday.

Why Facebook's IPO was a success
When your 401(k) will own Facebook

Even though Mark Zuckerberg has to answer to Wall Street, it doesn't mean he has to transfer his wealth to Wall Street. While it's still early in the game, I'd put the score at Zuckerberg 2; Wall Street 0.

Allan Roth

Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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