May 19, 2012
Facebook IPO, Final Thoughts
Michael Harper for RedOrbit.com
So, we all had a great day on Friday talking about Facebook only slightly more than we already do, and what did we learn?
First, it may appear that those who warned against getting too excited about Facebook´s IPO were correct, as reports are now coming in about how the Menlo Park company didn´t perform as well as everyone thought they would during their virginal experience on Wall Street. After all, can an IPO place a real value of the worth of Facebook?
Then, everyone loves to hate the big guy, and as Facebook is now the hottest thing going on the Internet, new accusations have arisen about some potential fancy foot work where taxes are concerned.
Finally, just as the stock was wobbling around $40, news broke of a new lawsuit over subscriber tracking, and those bringing the suit are looking for a $15 billion payout.
Facebook entered the day with an IPO of $38 per share, and during its first full day of trading, the price of FB stock hovered around the $40 mark. It seems the large surge to buy up as much stock as possible never came, and according to the LA Times, the Wall Street banks which helped bring Facebook to the public also had to work fast to keep the stock from falling flat on its face.
During its first day of trading, these underwriters bought up as many shares as they could, holding the stock price around $38 for most of the day. According to the LA Times, such a practice is fairly common during IPOs as banks and underwriters do what they can to protect themselves from first-day embarrassments.
Another part of the problem may have been early trading issues with Nasdaq, as FB didn´t start trading until 30 minutes after opening bell. Andrew Frankel, co-president of Stuart Frankel & Co., told the LA Times many traders "backed away from trading Facebook because Nasdaq had such system issues.”
In the end, FB traded nearly flat for the day, starting at $38 and ending at $38.23.
The day before Facebook´s big debut, Sen. Carl Levin, D, Mich. made claims that the social networking giant had plans to claim $16 billion in Tax deductions. Coincidentally, this is also the same amount the social networking giant was able to raise in their IPO. A regulatory filing by Facebook confirms the huge deduction, enabling them to collect a $500 million refund from the past 2 years and wiping out their tax bill for 2012.
According to CBS News, Facebook plans to use these deductions to generate a “net operating loss” to reduce their taxes down the road. Such a practice is common for large companies and very legal. Levin likely used Facebook as an example to attack the loophole in the system.
Finally, Facebook has never been known for their privacy. Rather, Facebook has never been known to make their privacy controls easy to use or easy to understand. As such, subscribers can often misunderstand or misappropriate the privacy controls and end up in some trouble.
Because of this, a $15 billion lawsuit was brought against the company from groups of subscribers who claim the site invaded their privacy by tracking their actions on the Internet after their Facebook session had ended.
“This is not just a damages action, but a groundbreaking digital-privacy rights case that could have wide and significant legal and business implications,” said David Straite, a partner who represents some of the users in a statement to Bloomberg.
Firing back, Facebook spokesman Andrew Noyes said in an emailed statement that the company will contest the claims and that they are without merit.
Now that Facebook is playing in the big leagues, trying to appease both their 900 million users and their shareholders, an interesting dynamic could arise, and along with it, some serious questions about privacy.
On one hand, we´ve become quite adapted to Facebook. It´s become our personal, digital calling card: what we use to share photos and music, verify our identity all over the internet and even meet that special someone. On the other hand, we´ve been giving Facebook a wealth of information about our behaviors, habits, health and lifestyle: a virtual bank of data that Facebook so desperately wants to withdraw from in order to appease the Street.
Will Facebook´s new priorities and dynamic change the way we use the service? Will we suddenly realize how creepy some of these new corporate behaviors can be and demand change, or will Facebook find some other way to bring in a steady stream of revenue? Stay tuned, it´s likely to be a bumpy ride.