Facebook Stock Nears IPO Float Price

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Facebook shares are on a roll and have recovered to almost reach their IPO float price

Facebook is pleasing investors after its share price staged yet another rally on Tuesday, bringing it close to its 2012 IPO launch price.

On Tuesday, shares in the social networking giant surged 7 percent amid heavy trading to reach $37.96 (£24.95), before slipping slightly to $37.63 (£24.74) as trading ended on Nasdaq.

This was very close to the $38 (£24.95) per share that Facebook had set as its floatation price during its initial public offering (IPO) back in May 2012. That share price gave Facebook a market value of $104 billion (£68bn).

Game Changing?

And now it seems as though Wall Street confidence in Facebook has been restored following its recent second quarter results, when it surprised the markets after posting a net profit of $333m (£217m), compared to a net loss of $157m (£102m) in the same year-ago quarter. Revenues also grew 53 percent to $1.8bn (£1.2bn) from $1.2bn (£773m) a year ago.

Facebook IPO © lev radin, Shutterstock 2012The positive results were driven mostly by a healthy rise in Facebook’s advertising revenues, especially in mobile advertising where revenues grew 75 percent in the quarter, easily beating analyst targets and leading some observers to suggest that the figures were a ‘game changing result’ for the company.

This growth came despite previous studies that questioned the value of advertising on Facebook.

When those results were revealed earlier this month, Facebook shares rallied 20 percent on the Nasdaq to reach $30.95 (£20.13) in after hours trading, before sliding back down to the $26.51 (£17.24) mark.

But with shares now sitting at the $37.63 (£24.74) mark before the US markets begin trading on Wednesday, it is clear there is a renewed sense of optimism about the company.

“Most companies of that size don’t re-accelerate their growth rate. Facebook’s been an exception,” Aaron Kessler, an analyst with Raymond James, was quoted as saying by Reuters. “I would say they’re in better shape today than they were at the IPO price and the stock is still below that,” he said.

Volatile Shares

There is little doubt that Facebook shares have been volatile during their 14 months public trading.

During Facebook’s IPO, the share price was floated at $38 on 18 May 2012 – a price that some felt was overvalued at the time. Nevertheless, on the day the shares peaked at the $45 (£29.55) mark, before closing that day at $38.23 (£25.11).

But Facebook’s shares looked destined to never trade at the $38 mark again, declining alarmingly soon afterwards. Matters were not helped by a number of problems on the Nasdaq Stock Market at the time of the IPO, which helped contribute to a sharp fall in Facebook’s share price.

Following the IPO, Facebook’s share price continued to plummet as executives offloaded swathes of stock, and it bottomed out at $17.55 (£11.52) in September 2012. Things are looking rosier now.

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Author: Tom Jowitt
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