Facebook’s Initial Public Offering (IPO) - May 18, 2012

On May 18, 2012, Facebook, the social media giant founded by Mark Zuckerberg, held its initial public offering (IPO), marking a significant milestone in the company’s history and the broader technology sector. This event was one of the largest IPOs in the history of technology and the Internet, raising approximately $16 billion.

Background

• Founding and Growth: Facebook was founded in 2004 by Mark Zuckerberg, along with his college roommates Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes, while they were students at Harvard University. Initially launched as a networking site for college students, Facebook rapidly expanded its user base and became a global social media platform.

• Pre-IPO Developments: Leading up to the IPO, Facebook had established itself as a dominant force in social networking, boasting over 900 million users worldwide. The company had also made strategic acquisitions, such as the purchase of Instagram in April 2012, to bolster its market position.

The IPO Event

• Stock Exchange: Facebook’s shares were listed on the NASDAQ stock exchange under the ticker symbol “FB.”

• Pricing and Valuation: The IPO was priced at \(38 per share, valuing the company at approximately \)104 billion. This valuation made Facebook the largest company to go public in the United States at that time.

• Underwriters: The IPO was underwritten by a consortium of financial institutions, including Morgan Stanley, J.P. Morgan, and Goldman Sachs, among others.

Key Events on the Day

• Trading Issues: The IPO day was marred by technical glitches on the NASDAQ exchange, which delayed the start of trading and caused confusion among investors. These issues led to regulatory scrutiny and criticism of NASDAQ’s handling of the event.

• Stock Performance: Despite the initial excitement, Facebook’s stock performance on the first day was underwhelming. The stock closed at $38.23, just slightly above the IPO price, after experiencing significant volatility throughout the day.

Aftermath and Significance

• Market Impact: The IPO was a landmark event in the tech industry, highlighting the growing influence of social media companies in the global economy. It also set the stage for future tech IPOs, influencing how companies approached public offerings.

• Regulatory and Legal Consequences: The technical issues during the IPO led to investigations by the U.S. Securities and Exchange Commission (SEC) and lawsuits from investors who claimed they were misled about Facebook’s financial prospects.

• Long-term Performance: In the years following the IPO, Facebook’s stock experienced fluctuations but ultimately saw significant growth, reflecting the company’s continued expansion and innovation in areas such as mobile advertising and virtual reality.

Broader Historical Significance

Facebook’s IPO underscored the transformative impact of social media on communication, business, and culture. It also highlighted the challenges and opportunities faced by tech companies in the public market, setting a precedent for future technology IPOs. The event remains a pivotal moment in the history of Silicon Valley and the global tech industry.