Facebook's IPO was eagerly awaited and was one of the largest ever. However, things have turned sour very quickly, with its stock down 29% since it debut two weeks ago and a series of legal cases being brought by investors who claim that Facebook and its advisers did not disclose pertinent performance data prior to the float.
In a previous post, I suggested that the high flotation price of Facebook was not justified by its profits. So why did investors believe the hype? Or were they conned? Notably, Zuckerberg and several other leading investors cashed out before Facebook stock plummeted - Zuckerberg sold 30.2 million shares when the price was still above $37.
Facebook's IPO has been dubbed the worst-performing IPO of the last decade. This is another worrying development for the IPO market, which has been drying up over the past decade or more - see Ritter et al's recent working paper on the decline of the US IPO market and my post on the Kay Review. This decline, amongst other things, has led the Economist to opine that the public company is an endangered species - click here.
