Rarely is there so much at stake in getting back to zero.
On Wednesday, Facebook Inc.'s stock briefly touched its initial public offering price of $38, hitting a marker that felt out of reach in autumn of last year, when the stock was in free-fall. While shares eventually drifted lower, to settle at $36.80, Facebook is still within striking distance of $38—a fact not lost on Facebook's investors, many of whom were burned in the company's botched IPO.
Facebook shares moved above their $38 price target for the first time in almost 440 days. After a year of peaks and valleys, is the Facebook turnaround here? Steven Russolillo discusses on MoneyBeat. Photo: AP.
[h=3]Facebook Hits $38[/h] Track the stock's closing prices and some key events since Facebook's May 18, 2012, initial public offering.
[h=3]From the Archives[/h]
"There's some relief," said Chris Baggini, a senior portfolio manager at Turner Investments, a firm with about $9 billion under management that has held most of its 2 million shares of Facebook stock since the IPO. "It only made sense that if they did the right thing, they would get paid."
For Facebook's co-founder and CEO Mark Zuckerberg, the $38 price had become a symbol of his company's hubris.
Shortly before the IPO, Facebook upped the size of its offering and pumped up the price to $38 a share, despite internal concerns about the strength of its mobile business and warnings from some bankers. While the IPO was also troubled by a slew of other factors, many critics blamed Facebook's management team for misjudging the company's value. Some accused the executives of greed.
Facebook isn't a fundamentally different company than it was a week ago, when it was trading at $26 a share. But since then it managed to surprise Wall Street with its second-quarter earnings report, with sales up 53% to $1.8 billion and mobile-ad sales also surging to comprise 41% of its business. The report caused many analysts to rethink their financial model—and punished those who bet on a decline.
"They were so far above where I thought they were doing, we had to be intellectually honest and say you don't want to short this stock anymore," said Rich Greenfield, a BTIG analyst.
Mr. Baggini of Turner Investments said it hasn't been easy being a Facebook investor, but he's pleased he's hung on. His firm bought its initial batch of shares at $38 in the IPO. In the subsequent days, as the stock dropped, there was internal debate at his firm as to whether they should move fast to unwind their position.
His firm sold some stock, but Mr. Baggini said he felt that the fundamental thesis was accurate: that Facebook had too many users, too much traffic, not to figure out how to make a lot more money from advertisers. In the fall of last year, as early investor lock-ups expired and the stock fell further, Turner Investments began buying more shares in the low $20s.
"I feel vindicated," Thomas Vandeventer, a manager of the Tocqueville Opportunity Fund said of his original thesis on Facebook. Mr. Vandeventer sold off all his Facebook stock earlier this year, but came back to buy a lot more in the second quarter.
Even with the recent rally, Facebook hasn't fared as well as LinkedIn Corp., the professional networking service, which is still above $200 a share—more than quadruple its 2011 offering price of $45. Facebook's ascent is even less impressive considering the Standard & Poor's 500-stock index has risen about 30% since the May 18, 2012 IPO.
Some investors are still disappointed Facebook hasn't yielded the riches many thought might come from one of the biggest U.S. stock-market debuts of all time.
David Guthrie, a 31-year-old actor and student, has held onto the 15 shares that he bought for about $38 on the social-networking company's first day of trading. Even though he's now about even on his Facebook investment, Mr. Guthrie said he's still not pleased.
"It almost makes it feel like it was pointless. I'd almost rather lose it than get that money back," he said. "When I bought it, I bought it as a gamble with the hope that it would go up and I'd make a few thousand off the few hundred I spent."
Mr. Guthrie said the experience has turned him off from the stock market. In the future, he plans to invest money in real estate instead, he said.
—Joe Light contributed to this article. Write to Evelyn M. Rusli at [email protected]
On Wednesday, Facebook Inc.'s stock briefly touched its initial public offering price of $38, hitting a marker that felt out of reach in autumn of last year, when the stock was in free-fall. While shares eventually drifted lower, to settle at $36.80, Facebook is still within striking distance of $38—a fact not lost on Facebook's investors, many of whom were burned in the company's botched IPO.
Facebook shares moved above their $38 price target for the first time in almost 440 days. After a year of peaks and valleys, is the Facebook turnaround here? Steven Russolillo discusses on MoneyBeat. Photo: AP.
[h=3]Facebook Hits $38[/h] Track the stock's closing prices and some key events since Facebook's May 18, 2012, initial public offering.
[h=3]From the Archives[/h]
- Table: Funds That Own Facebook (Aug. 24, 2012)
- Table: Mutual Funds With Facebook Shares (July 9, 2012)
- Table: Analysts Rate Facebook Shares (June 27, 2012)
- Bios: Who's Who at Facebook (June 25, 2012)
- Graphic: Facebook IPO's Winners and Losers (June 17, 2012)
- Document: Standard & Poor's Capital IQ on Facebook (June 4, 2012)
- Timeline: Facebook IPO's Rocky Road (May 22, 2012)
"There's some relief," said Chris Baggini, a senior portfolio manager at Turner Investments, a firm with about $9 billion under management that has held most of its 2 million shares of Facebook stock since the IPO. "It only made sense that if they did the right thing, they would get paid."
For Facebook's co-founder and CEO Mark Zuckerberg, the $38 price had become a symbol of his company's hubris.
Shortly before the IPO, Facebook upped the size of its offering and pumped up the price to $38 a share, despite internal concerns about the strength of its mobile business and warnings from some bankers. While the IPO was also troubled by a slew of other factors, many critics blamed Facebook's management team for misjudging the company's value. Some accused the executives of greed.
Facebook isn't a fundamentally different company than it was a week ago, when it was trading at $26 a share. But since then it managed to surprise Wall Street with its second-quarter earnings report, with sales up 53% to $1.8 billion and mobile-ad sales also surging to comprise 41% of its business. The report caused many analysts to rethink their financial model—and punished those who bet on a decline.
"They were so far above where I thought they were doing, we had to be intellectually honest and say you don't want to short this stock anymore," said Rich Greenfield, a BTIG analyst.
Mr. Baggini of Turner Investments said it hasn't been easy being a Facebook investor, but he's pleased he's hung on. His firm bought its initial batch of shares at $38 in the IPO. In the subsequent days, as the stock dropped, there was internal debate at his firm as to whether they should move fast to unwind their position.
His firm sold some stock, but Mr. Baggini said he felt that the fundamental thesis was accurate: that Facebook had too many users, too much traffic, not to figure out how to make a lot more money from advertisers. In the fall of last year, as early investor lock-ups expired and the stock fell further, Turner Investments began buying more shares in the low $20s.
"I feel vindicated," Thomas Vandeventer, a manager of the Tocqueville Opportunity Fund said of his original thesis on Facebook. Mr. Vandeventer sold off all his Facebook stock earlier this year, but came back to buy a lot more in the second quarter.
Even with the recent rally, Facebook hasn't fared as well as LinkedIn Corp., the professional networking service, which is still above $200 a share—more than quadruple its 2011 offering price of $45. Facebook's ascent is even less impressive considering the Standard & Poor's 500-stock index has risen about 30% since the May 18, 2012 IPO.
Some investors are still disappointed Facebook hasn't yielded the riches many thought might come from one of the biggest U.S. stock-market debuts of all time.
David Guthrie, a 31-year-old actor and student, has held onto the 15 shares that he bought for about $38 on the social-networking company's first day of trading. Even though he's now about even on his Facebook investment, Mr. Guthrie said he's still not pleased.
"It almost makes it feel like it was pointless. I'd almost rather lose it than get that money back," he said. "When I bought it, I bought it as a gamble with the hope that it would go up and I'd make a few thousand off the few hundred I spent."
Mr. Guthrie said the experience has turned him off from the stock market. In the future, he plans to invest money in real estate instead, he said.
—Joe Light contributed to this article. Write to Evelyn M. Rusli at [email protected]