From Facebook's perspective, was the fall in price after IPO actually an indication that it went well?
You are right that Facebook really doesn't get impacted as they got their $38. However it would make it slightly more difficult for Facebook to raise more money in future as large investors would be more cautious. This can keep the price lowers than it actually needs to be. Quite a few companies try to list the IPO at lower price so that it keeps going up and have more positive effect overall there by making it easier for future borrowings. See related question Why would a company care about the price of its own shares in the stock market? @Joe.E, I disagree with your logic. The IPO clearly didn't go well--not relative to other IPOs.  Were it not for the stocks underwriters stepping in late in the trading day, Facebook would likely have closed below their opening price. This story and others indicate that institution investors were given negative information by an analyst for the underwriters that other investors didn't have.  This inside knowledge is certainly contributing to the drop in the stock.  It's fair to argue that many individual investors were suckered into buying the stock at the IPO price because of this incomplete disclosure. It wouldn't surprise if what's happens has a negative impact on future trading volume, and creates reluctance to invest in the firm--which would certainly be an additional negative outcome beyond the dropping stock price. Edit: Dilip mentioned a lawsuit.  Here's a link to an article about it. There could be an impact on Facebook because just before the IPO, Morgan Stanley apparently sent information to selected clients that their analysts had just lowered their valuation of the company.  There were also reports yesterday that the lowered valuation came about because Facebook sent some revised preliminary estimates of second quarter earnings (showing lower than expected earnings) to Morgan Stanley, and least one talking head said that Facebook might also face charges depending on what the cover letters and the e-mails back and forth between Facebook and Morgan Stanley said. Investigations have already been opened.  Yes, a company wants to sell the stock being offered at the IPO at the highest price possible, but if it misled the public when offering the stock for sale (through its underwriters), it can also be liable, possibly even criminally liable. Material added in Edit: In fact, a lawsuit has already been filed  in the US District Court in Manhattan in this matter. Whether the SEC ever does anything about the matter remains to be seen. "Discussing individual stocks is discouraged here, so I'll make my answer somewhat generic. Keep in mind, some companies go public in a way that takes the shares that are held by the investment VCs (venture capitalists) and cashes them out of their positions, i.e. most if not all shares are made public. In that case, the day after IPO, the original investors have their money, and, short of the risk of being sued for fraud, could not care less what the stock does.  Other companies float a small portion up front, and retain the rest. This is a way of creating a market and valuing the company, but not floating so many shares the market has trouble absorbing it. This stock has a ""Shares Outstanding"" of 2.74B but has only floated 757.21M. The nearly 2 billion shares held by the original investors certainly impact their wallets with how this IPO went.  See the key statistics for the details."
FB's IPO was at exactly the right price.  The intent all along was to allow insiders to sell to retail bagholders, hence the large support by JPM to hold the line at $38.0000000, the absolutely legendary hype, and the unusual step of allowing retail in on it. "I really don't understand. Yes, facebook overpriced their IPO. I suppose they may have to renegotiate some of their retention deals. On the other hand, they brought in significantly more capital than if they had priced the deal ""correctly"". If anything, Ebersman did a great job of getting facebook the maximum amount of capital while at the same time giving up the minimum amount of equity." Yeah from what I've read, Facebook is pilling up the profits so they could be in very good position to do the RA as well.   Its crazy if you think about the Google one.. At least $100m more went to the shareholders due to the different fee structure. Why wouldn't you do that if you had the option? &gt;does it have growth prospects?  Exactly this.  There's no reason to believe that Facebook will grow enough to support that price tag.  This is something that any company that becomes large relative to the market has to deal with.  Demand becomes limited by the size of the market.  Even after absorbing/destroying competitors there just isn't that much more room for growth.  Facebook's pricing will hopefully be a bit of a wake-up call.  We don't need another dotcom bust.  Facebook might be very valuable but you're kidding yourself if you think it is more valuable than a company like UTC for example. "I actually tend to disagree.  This was one of the most watched IPOs in history.  Facebook would have benefited greatly from a pop.  People would have thought ""wow, they really can do no wrong"".  Instead there are endless negative articles about how this is a horrible failure.  Sure, financially savvy people look at this and think FB did a beautiful job.  They maximized their take from the IPO.  But the price of the bad press can't be accurately measured.  The benefit in terms of publicity of being seen as a stock/company on the move UP is hard to measure too.  Suppose they had priced it at $25 and limited the number of shares they would have gotten less money but they'd also be looking at a massively successful pop on their share price.  The halo effect on their business of THAT reality seems to me to have had the potential to be significant.  So I'm not so sure, in the long term, whether it would have made more sense for them to get less money up front and get a successful IPO rather than go for the max dollars and have a PR disaster.  I think the way things turned out made FB go from an unstoppable juggernaut into a company that can fail just like any other." I could argue Amazon. And Facebook the other way.  Before the down-vote brigade appears, I'll just say I said I could *argue* those points. Also, I haven't done valuation in years, and definitely not for tech because while I am a big techie, the industry itself seems likes a clown lottery with respect to valuation. The Facebook IPO wasn't a debacle. Facebook got maximum value for their shares. That's precisely what you want at IPO. If you sell your stock initially for $25, and next week it's at $35, you've left a hell of a lot of money on the table. It's generally the hype that blinds them. Unfortunately, as rare as it happens on the scale of the FB IPO - it shouldn't happen at all. But then again, if everyone was well educated, informed and risk averse - we wouldn't have losers in the market. Everyone can't keep winning forever! From March 26th to May 3rd FACE had an average trade volume of 11,657 shares. May 4th Bloomberg published its widely reported [article](http://www.bloomberg.com/news/2012-05-03/zuckerberg-s-facebook-ipo-will-make-him-richer-than-ballmer.html) about how the upcoming Facebook IPO would make Zuckerberg one of the richest people in the world. On May 4th, 212,000 shares of FACE were traded (an 18x increase) and the price jumped from 3.10 to 3.79, up 22%.  Maybe it's not that surprising, considering even news articles in [Yahoo! Finance](http://finance.yahoo.com/news/facebook-underwriters-1-1-percent-010320322.html) can't keep the companies straight.  Still, if you accidentally bought FACE it's not all that bad. In fact, [you're doing much better](http://finance.yahoo.com/echarts?s=FB+Interactive#symbol=fb;range=20120518,20120601;compare=face;).  Yes, FACE's 10-Q came out the previous day, but past 10-Q releases didn't result in any sudden increase in trading volume at all: [11/3/2011](http://finance.yahoo.com/echarts?s=FACE+Interactive#symbol=face;range=20111018,20111111;), [8/4/2011](http://finance.yahoo.com/echarts?s=FACE+Interactive#symbol=face;range=20110718,20110811;), [5/5/2011](http://finance.yahoo.com/echarts?s=FACE+Interactive#symbol=face;range=20110418,20110511;) I'm new to investing but let me present you with my logic. Let me first say I bought at 38.01, and while I don't regret buying in, I suppose i DO regret buying in at 38.01 when I could have gotten in when it was in the 20's.  There is sort of a counter-hype lured me in.  With so many establishments saying facebook was built on hype and was going to burn a lot of investors, I actually thought it might go up.    On top of that, I believe in the company.  With their customer base, they can literally choose segments of the market and dismantle them.  Paypal? Boom, gone with a facebook payment system, Craigslist? Boom, gone with a properly implemented facebook marketplace... (all hypothetical at this point ofc) there are so many different arena's facebook can delve into with the enormous customer base they have.  And that's why I jumped in. "To know if a stock is undervalued is not something that can be easily assessed (else, everybody would know which stock is undervalued and everybody will buy it until it reaches its ""true"" value). But there are methods to assess the value of a company, I think that the 3 most known methods are: If the assets of the company were to be sold right now and that all its   debts were to be paid back right now, how much will be left? This   remaining amount would be the fundamental value of your company. That method could work well on real estate company whose value is more or less the buildings that they own minus of much they borrowed to acquire them. It's not really usefull in the case of Facebook, as most of its business is immaterial. I know the value of several companies of the same sector, so if I want   to assess the value of another company of this sector I just have to   compare it to the others. For example, you find out that simiral internet companies are being traded at a price that is 15 times their projected dividends (its called a Price Earning Ratio). Then, if you see that Facebook, all else being equal, is trading at 10 times its projected dividends, you could say that buying it would be at a discount. A company is worth as much as the cash flow that it will give me in   the future If you think that facebook will give some dividends for a certain period of time, then you compute their present value (this means finding how much you should put in a bank account today to have the same amount in the future, this can be done by dividing the amount by some interest rates). So, if you think that holding a share of a Facebook for a long period of time would give you (at present value) 100 and that the share of the Facebook is being traded at 70, then buy it. There is another well known method, a more quantitative one, this is the Capital Asset Pricing Model. I won't go into the details of this one, but its about looking at how a company should be priced relatively to a benchmark of other companies. Also there are a lot's of factor that could affect the price of a company and make it strays away from its fundamental value: crisis, interest rates, regulation, price of oil, bad management, ..... And even by applying the previous methods, the fundemantal value itself will remain speculative and you can never be sure of it. And saying that you are buying at a discount will remain an opinion. After that, to price companies, you are likely to understand financial analysis, corporate finance and a bit of macroeconomy." This just proves when you're able to offer a physical product or service it is always a good investment. Especially because they own so much land. It's nice to see a company IPO that isn't an investment group, or an online business, but an actual producer of physical goods. And also the fact that it has a market cap of $3.3 bln, a number that looks like it can easily grow over time (citing Facebook's ~$100 bln entry point). No. Amazon puts tons of money into expansion. They don't care what shareholders think about it, because it pays off later in incredible fashion.   Every few quarters they decide to throw a ton back into infrastructure and investment.     The stock barely dropped. Only on an accounting basis. The moment they start selling, it would plunge. Take a look at all the small float tech IPOs. Big pop, but once the lockup period ends, it drops 50% as insiders sell. In the end, fundamentals will rule. Facebook managed to unload a quarter of the company at the vastly inflated $38, which is very impressive. The other tech IPOs typically sell less than 10%, because selling more would lead to very low share prices. Remember, these guys are not retail investors selling 100 shares. The ticker shows the price of the last block of shares that was traded, but when someone tries to sell a couple million shares, then it will plunge. Different exchanges sometimes offer different order types, and of course have different trading fees.  But once a trade is finished, it should not matter where it was executed.