Facebook shares half in value...
 

http://www.bbc.co.uk/news/business-19285925

I'm not sure of the ins and outs, but I think this makes me look a bit stupid somehow?

Depends how many you bought and at what price http://www.discussworldissues.com/fo...es/tongue1.gif

None, lol.

I can't remember what I said exactly about where and when the price would drop. Will try and find it.

$25 [in six weeks] won't seem too far-fetched I tell ya http://www.discussworldissues.com/fo...lies/cool1.gif

I wasn't that far off. They were at $25.75 on the 5th of June (intra-day low).

Why is that?

That thread.

If I remember correctly, their IPO was considered to be highly over-valued upon debut. The average investor really shouldn't have bought any shares, and if they did, sucks for them.

Ah I see. Good job you don't work in the stock market ey Moosey?

I was about to quote that, lol.

Nope, looks like I hedged my bets well.

Who cares, the most important thing is we made a ton of money.

Did not click the link, but let me guess: shorted the **** out of boy Zuckerburg?

Uhuh...

It works like this.

You over subscribe the IPO but meet demand by selling short (naughty naughty). You can get away with this because there is a 3 day settlement cycle for equities. Then, when the price tanks (tee hee) you can cover your short positions easily and make a load of wonger.

Stabilization works this way, people familiar with the process say: If investors are selling the stock after the IPO launches, pushing the price lower, bankers can step in and buy shares at the IPO price in an attempt to keep it from falling below its issue price. This also serves to cover their short positions. If a short position remains on their books and the stock keeps falling--which was the case with Facebook on subsequent trading days--the underwriters can continue to cover their short positions by buying back shares at prices below the IPO price, netting a profit. Just a question as I'm a little confused having read through the article you linked.

Is the underwriter obligated to step in and attempt to stabilise the price? Logic would say that if the underwriter was working in the best interest of the IPO'ing company that if the stock tanks as much as it did, there wouldn't be any shares left to short on at a profit as they would have bought them all at IPO price in an effort to stabilise?

It reads almost like it is in the banks interest for the IPO to go badly and the price to drop right after flotation? http://www.discussworldissues.com/fo.../confused1.gif or am I missing something?

that's the problem with shares..

I paid for most of our wedding with some of the shares I had in pharmaceuticals, when they were at 1500p.(400 shares worth)

the week after that they dropped to 1275p per share then down to 1100p.

now they are back up to 1472 they did peak last week at 1500p again but I missed out, as they were 1140p the last time I checked in 2011, and I'd forgotten all about them.

http://www.google.co.uk/finance?client=ob&q=LON:gsk

still have loads,every dividend I get is automatically set to more shares.

First things first. The Bank's job is to ensure the client gets the funding they're looking for (the client in this case is facebook), so the initial sale is intended to raise as much as possible at the highest price. Anyone who thinks otherwise, morally or financially could end up on the wrong side of a crappy deal.

Let's say I am the bank, and you guys here are the bidders, Lang is Facebook. I have 100 shares to sell and I want to sell them at $10 each - Lang wants to make $1000. Bear in mind, Lang can always buy back the shares.

You guys create demand for 120 shares, however some of you will buy and dump hoping for a spike (hedge funds). So I will throw 120 shares on the market, selling 20 of them short immediately, putting $200 in the bank. As the price drops intraday from those looking to gain from the initial spike selling, I'll use that money to buy back (real shares) to prop up the price - in fact in this scenario I have the ability to hold the market up 20%, usually way more than enough.

When the dust settles (no pun intended) I might be left with some short positions, rarely none. As the price falls, you buy back to a zero delta on the position making a little on the side. If the price rises, then perhaps greenshoe option comes into play, and the client makes more shares available.

The intent is not for the underwriter to lose money, or even to make a killing, it's really about getting the client their funds and making commission. You also may make new clients who want to buy into the IPO.

Thanks for the response. I understand what you are saying, but I'm still left with my original question, is the underwriting bank contractually obligated to use its short positions to prop up the price or is it optional? If they are obligated, I still don't get why the bank would still have any short positions if the stock price was still a way below the initial floatation. If not, then fair enough, is it that the IPO'ing company is more concerned about what price the shares are initially sold and the amount raised rather than the price they end up at after the dust settles?

They debuted them intentionally way too high. It's all but been admitted it was a big pump and dump.

They are obligated to act in the best interest of the client. Not everyone who shows interest in an IPO will buy shares, so over allowing oversubscription hedges against a poor showing.

Everyone got caught up in the frenzy, then on the big day with the markets still volatile and NASDAQ having problems, I think there was a huge 'smell the coffee' moment.

This is just a woefully ignorant statement, I am surprised Zoolook let you get away with that.

Seriously man, ditch the Info Wars and get a grip on reality.