Facebook’s May 18 debut on the Nasdaq was the most hotly anticipated consumer Internet initial public offering since Google’s in 2004 and the largest tech IPO in U.S. history. While some where rightfully skeptical of the social network’s overblown $100 million-plus valuation, no one could have predicted the drama that started at 11:00 a.m. Eastern that day.
The Nasdaq proved ill-prepared to hand the volume of trading. The system got backed up, trading was delayed, and order and cancellation confirmations only made their way to traders and bankers much later in the day. The flubbed opening left the Nasdaq with more than a little egg on its face. The exchange eventually proposed a $62 million, all-cash settlement, which has yet to be approved by the SEC.
Meanwhile, Facebook’s share price was hit with the ugly stick. After a disappointing first day of trading that saw underwriters scramble to keep shares above the $38 IPO price, the stock went on to lose more than half of its value by early September. To boot, Facebook currently faces consolidated class action lawsuits for allegedly disclosing material information about financials to privileged insiders.
Glitches and big hiccups aside, Facebook’s stock has recovered somewhat in the final three months of 2012. The company appears much stronger on mobile and is aggressively pushing forward with initiatives like Gifts to boost revenue. Still, Facebook’s stock is down around 30 percent from its IPO price.
No acquisition proved more gripping than the swiftly negotiated, colossal deal between Facebook and photo-sharing phenom Instagram.
On April 9, Facebook announced that it had agreed to acquire Instagram in a cash and stock arrangement then valued at $1 billion. The surprise buy came just days after Instagram launched its first application for the Android platform.
But it was the behind-the-scenes wheeling and dealing of Instagram co-founder Kevin Systrom that made this deal particularly fascinating. In the weeks prior to the Facebook announcement, Systrom participated in active negotiations with cross-town pal Twitter. The photo social network received an offer and a term sheet from the information network, VentureBeat was first to report. Twitter apparently offered $525 million in cash and stock, the New York Times recently revealed.
Systrom was able to use the Twitter offer and an in-progress funding round to double the value of his two-year-old company during a speed round of negotiations with Facebook founder and CEO Mark Zuckerberg.
The Facebook-Instagram deal eventually closed in October. By that time, Facebook’s stock price had dropped, making Instagram worth just $715 million at the time. Our fascination with the acquisition has yet to fade.