The Joplin Globe, Joplin, MO


May 18, 2012

Facebook underwriters prop up stock as it nears break-even mark

NEW YORK — The big pop in Facebook Inc. shares never came.

Buyers did not rush into the market to snap up shares of the social networker. And the big Wall Street banks that brought Facebook public scrambled to prevent the stock from collapsing into declines.

The underwriters averted a potential debacle by scooping up shares of the company during the Nasdaq debut. This propped up the stock, keeping it above the $38 offering price through most of the day.

“When a deal gets priced and breaks price on the first day, that’s definitely a major embarrassment,” said trader Andrew Frankel, co-president of Stuart Frankel & Co. “But it didn’t do that here — at least for the time being.”

The practice is pretty standard during IPOs, especially high-profile ones like Facebook. The big banks buy into a wave of selling as a way to prevent their customers from suffering big losses.

The syndicate of underwriters led by Morgan Stanley helped prop up shares after the Nasdaq Stock Market experienced technical problems processing trades. A number of brokerages reportedly said they were having problems trying to trade the stock.

“There are currently industrywide delays in reporting trade executions,” Michael Cianfrocca, a spokesman for brokerage Charles Schwab, told Bloomberg News. “These issues do not appear to be unique to Schwab.”

The problems could threaten the Nasdaq’s reputation as the premier platform to list big blue-chip technology companies. The exchange won a hard-fought battle against the New York Stock Exchange for a chance to list Facebook.

Spokesmen for the Nasdaq did not return several telephone calls and emails seeking comment.

Many traders, Frankel said, “backed away from trading Facebook because Nasdaq had such system issues.”

The stock bolted at the open to $42.05, but then quickly withered in the first hour of trading. It touched $38 several times, but eked out a small rebound and leveled off at about $40.

Barry Ritholtz, head of Fusion IQ, an investment research firm, added: “It pretty much started straight down to $38, where as normally happens, the underwriters defended it.”


Text Only

Do you think Missouri should pass legislation that would allow a prescription drug database to be kept?

A. Yes.
B. No.
     View Results
Twitter Updates
Follow us on twitter
NDN Video
Raw: Israel Bombs Multiple Targets in Gaza Veteran Creates Job During High Unemployment Raw: Cargo Craft Undocks From Space Station Widow: Jury Sent Big Tobacco a $23B Message New Orleans Plans to Recycle Cigarette Butts UN Security Council Calls for MH 17 Crash Probe Obama Bestows Medal of Honor on NH Veteran Texas Sending National Guard Troops to Border Hopkins to Pay $190M After Pelvic Exams Taped Foxx Cites Washington 'Circus Mirror' NASA Ceremony Honors Moon Walker Neil Armstrong Obama Voices Concern About Casualties in Mideast Diplomacy Intensifies Amid Mounting Gaza Toll AP Exclusive: American Beaten in Israel Speaks Obama Protects Gay, Transgender Workers Raw: Gaza Rescuers Search Rubble for Survivors Raw: International Team Inspects MH17 Bodies Raw: 25 Family Members Killed in Gaza Airstrike US Teen Beaten in Mideast Talks About Ordeal 'Weird Al' Is Wowed by Album's Success