Market pop fades for Facebook shares

Facebook shares saw an opening pop fade Friday as the wildly popular social network made its long-anticipated market debut.

The shares, priced at $38 in the largest-ever initial public offering (IPO) for a technology company, jumped 12 percent to $42.55 in the opening Nasdaq trades before enthusiasm faded.

The shares dropped back all the way to the $38 offering price before showing modest gains at midday.

"The reaction is a bit cooler than many would have hoped," said Gerard Hoberg, an economist at the University of Maryland.

Lou Kerner at the Social Internet Fund said the market action suggest the IPO was correctly priced.

"The bankers appear in the first few minutes to have done a pretty good job," he said.

"The company raised a ton of money, lots of early investors, employees, and founders were able to monetize shares, and it's trading up a little, so the new investors did OK."

Investors were expected to be hungry to get in at the start for Facebook, which has has amassed 900 million members since its beginnings in 2004 as a project of then-Harvard student Mark Zuckerberg and his classmates.

Zuckerberg, wearing his trademark hooded sweatshirt, remotely rang the bell to open the Nasdaq, marking the historic share offering that confirms the growing importance of the social network giant.

Amid a crowd at Facebook's California headquarters, Zuckerberg and hundreds of employees cheered as the 28-year-old co-founder rang the bell via video for the New York-based Nasdaq.

Zuckerberg wore a dark hoodie, unfazed by criticism from some on Wall Street about his casual attire. And most of those on hand for the ceremony were wearing similar sweatshirts or T-shirts.

The IPO gave Facebook a dizzying value of $104 billion at its market debut.

The IPO raised more than $16 billion, making it the richest after that of financial giant Visa in 2008, according to Renaissance Capital. The addition of a possible stock "over-allotment" could boost the total to $18.4 billion.

Facebook itself sold 180 million shares and early investors in the company the remaining 241 million.

With a market value of $104 billion, Facebook is now among the most valuable US companies, ahead of sector giants Amazon ($98 billion) and Cisco ($89 billion), and more than twice the value of Ford Motor Co. ($38 billion).

But it remains behind Google ($203 billion) and Apple ($495 billion).

Facebook employees staged a software coding "hackathon" at the company's offices in the Silicon Valley city of Menlo Park overnight ahead of the market opening.

Under the share plan, Zuckerberg, who began Facebook with classmates at Harvard in 2004, will hold 55.8 percent of the voting power of Facebook shares, and over 18 percent of the value of the company, which he controls through a dual class stock structure.

Wall Street and investors around the globe have been girding for a Facebook IPO frenzy over the past few days as Facebook boosted the estimated price for its shares and added to the number being offered by insiders.

London-based Hargreaves Lansdown Stockbrokers said Facebook may have a hard time living up to lofty expectations but pointed out that it is "a relatively developed company which can display 'real' income and profit."

"There are extremely high expectations for the company's prospects and perhaps on that basis it deserves the punchy valuation it has been given," the brokerage said in a note to clients.

But the brokers said Facebook faces challenges including how to make money from the growing base of mobile users.

One of the shadows hanging over Facebook is concerns over privacy.

Some 900 million people use Facebook. But when they realize their private information is being bought and sold, some don't like it so much.

Some consumer and privacy advocates say Facebook has been too loose with user data, and hope that as a publicly traded company, it may change its tune.

Zuckerberg has repeatedly apologized for privacy lapses amid outrage from users over revelations their online activities were visible to a wide audience of advertisers and other users.

The IPO's net proceeds to Facebook are estimated at $6.4 billion. The rest of the cash goes to Facebook insiders and others who made early investments in the social network, and to cover the IPO costs.

At the heart of the debate about the wisdom of owning a piece of Facebook is how much revenue it takes in.

Revenue vaulted to $1.06 billion in the quarter which ended March 31 -- an improvement year-over-year but down about six percent from the previous quarter.