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It may have been one of the most-hyped public debuts in years, but Facebook (NASDAQ:FB) didn’t shatter any records today. The stock began trading publicly late this morning at $42.05, lower than many had predicted after the company sold 421.2 million shares at $38 apiece yesterday to raise $16 billion, valuing the company at $104 billion.
Some had projected shares could be priced as high as $45 when they began trading today, some estimated as high as $48 — the actual price was at the low end of most ranges.
By the time markets closed at 4 p.m. EDT in New York, Facebook shares were trading just slightly above the IPO price, and are flat in after-hours trading. FB closed at $38.27 today on the Nasdaq, up only 0.71 percent from its initial offering price, and well below where it started the day.
Why the pullback?
There have been questions about Facebook’s growth prospects and its plans to sustain momentum — revenue grew 24-fold from 2007 to 2011. First-quarter profits fell to $205 million this year as sales growth slowed and marketing costs skyrocketed.
And despite its miraculously still-growing user base, ad sales have not been growing very quickly for the company, which has a much lower click ratio than many other services. According to Larry Kim, founder and chief technology officer of Internet ad consultant Wordstream, “The average targeted ad on the Internet is “clicked” on by a consumer once every 1,000 times it is viewed. Facebook’s rate is half that, while Google’s (NASDAQ:GOOG) is 4 in 1,000.”
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That’s why General Motors (NYSE:GM) pulled out of Facebook this week in a very public move that called attention to some of the latter’s shortfalls.
Facebook has also been struggling to adapt both technological innovation and advertising on mobile devices. Its mobile app has been the target of much criticism lately, both from analysts, who fault Facebook for not monetizing on the source of a rapidly increasing amount of traffic, and from users, who say the mobile app isn’t as intuitive as they’d like.
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