David Brancaccio: The brand new stock in Facebook is down 11 percent right now to $33.11. If day one of trading was seen as a disappointment, day two is so far not winning many new friends at the social networking company.
Joining us live to help us update progress in what was one of the biggest initial public offerings ever is Marketplace’s New York bureau chief Heidi Moore. Hello Heidi.
Heidi Moore: Hi David.
Brancaccio: What is happening with this IPO today?
Moore: Sure, well just to give you a sense of scale, Facebook on Friday at its highest value was worth $112 billion, right now it’s worth $93 billion. That’s $19 billion in lost value over one trading day, and the reason for that is not because Facebook is a terrible company, it’s that the market thinks that the price for this stock is too high. So Facebook couldn’t sustain the $38 a share price set by the underwriters. On Friday, of course, we saw that, because the underwriters, including Morgan Stanley, had to step in and actually buy up Facebook shares to keep them from tanking.
Brancaccio: Why do the underwriters actually care about keeping the shares above a certain level?
Moore: Well part of it is that it’s what they’re paid for, so it is their job, and managing market demand is what they do. It’s also symbolic, you know if you set a price at $38 and all of the sudden its at $33, it looks like the company isn’t worth much and that the stock market just doesn’t love it.
Brancaccio: Now there were some technical snafus with the NASDAQ market with the launch of this stock. Do you think that is actually playing out with the price of Facebook?
Moore: Probably not anymore. There were arguments that trouble getting those orders filled may have dragged down the price on Friday, but now it’s Monday, and really what this shows is that investors don’t think Facebook is worthy of a market value greater than Pepsi or McDonalds.
Brancaccio: Marketplace’s Heidi Moore in New York, thank you very much.
Moore: Thank you.