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Facebook shares close near opening price

May 18, 2012 12:00:00 AM PDT
It was one of the biggest market debuts in years, but Facebook shares closed just 23 cents up from its IPO on Friday.

It's a company close to a billion people on the planet have a personal relationship with, and yet when Facebook opened on the Nasdaq, it barely budged.

The issue price for the stock was $38. In seconds it was up to $45 a share - more than 18 percent move to the up side. But by the end of the day, Facebook stock wound up just about where it started at $38.23. Many analysts had expected a jump of at least 5 to 10 percent.

Still, the tech stock was one of the most traded stocks on the Nasdaq.

Just eight years ago, it was college student Mark Zuckerberg's dorm-room dream, and now it is a company worth more than $100 billion. Zuckerberg rang the Nasdaq opening bell at 6:30 a.m. PT. Facebook was scheduled to start trading at 8 a.m. PT, but it was delayed for about half an hour. Its ticker symbol is FB.

"Going public is an important milestone in our history. But here's the thing, our mission isn't to be a public company, our mission is to make the world more open and connected," Zuckerberg said.

Some experts said anyone who is going to make money on Facebook stock has already made it, and warned retail investors to stay away, at least for now.

"This is a very tough market. I think Facebook's growth has plateaued," said stock expert Francis Gaskins.

Facebook's valuation is the third-highest in an IPO, according to Dealogic, a provider of financial data. Facebook's IPO will raise about $16 billion for the company. That money can be used to make further investments. Facebook hopes to monetize all the people that use the social networking site through advertising. About 900 million users check into Facebook each month.

Earlier this week, General Motors announced it was dropping its advertising campaign with Facebook because they said it wasn't effective and they weren't getting revenue out of it. But other companies said with the huge audience, the advertising is working for them.

Though Zuckerberg is selling about 30 million shares, he will remain Facebook's largest shareholder. Even after the IPO, he will own 503.6 million shares, or 32 percent of Facebook's total shares. At the $38 share price, his stake in the company is worth $19.1 billion.

Facebook IPO helps California budget

Many Facebook employees became instant millionaires when the company went public. And because most of them live in California, the state budget will get a boost.

California treats capital gains like wages, so it will be taxed at the rate of 9.3 percent. Gov. Jerry Brown believes that will bring in about $1.5 billion through June 2013 based on stock at $35 a share.

The most immediate benefit will be from Zuckerberg himself, who filed with the Securities and Exchange Commission he's optioning 60 million shares.

"Based on the state's current tax rates, the exercise of his options alone will generate $195 million in personal income tax revenue for the state of California from one individual alone," said H.D. Palmer from the California Department of Finance.

The state budget is expected to get a bigger windfall in six months when restrictions expire on Facebook employees, and they can begin selling their stock. But the non-partisan legislative analyst whose latest report reveals some of Brown's budget numbers are off warns it's hard to tell what workers will do and when.

If voters approve Brown's tax measure in November, Facebook workers could see their taxes jump up another 3 percent, adding another $400 million to California's treasury.

The last windfall for state coffers was when search giant Google went public in 2004, leading to $7 billion in extra taxes over three years.

But as much as all this money sounds great, it's not enough to erase the $16 billion deficit.

The Associated Press contributed to this report.


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