Facebook (FB), now Meta Platforms Inc. (META), went public with its initial public offering (IPO) on May 18, 2012. The popular social networking company had one of the largest and most anticipated IPOs in history. FB shares closed at $38.23 on that day, slightly above the $38.00 IPO price.
Key Takeaways
- Meta (formerly Facebook) has become the dominant social media platform on the planet, with over 2.9 billion monthly active users.
- The company was founded in 2004 and went public via IPO on May 18, 2012 with a share price of $38.
- The price dropped to under $18 a share early on before rising to where it is in 2023, with a market cap of around half a trillion dollars.
Facebook's IPO Failed to Meet Expectations
Facebook made its long-awaited filing for an initial public offering with theSecurities and Exchange Commission (SEC) on Feb. 1, 2012. Facebook stated before its initial public offering that it had a net income of $1 billion in 2011, which was an increase of 65% from 2010. The company also stated it had 845 millionmonthly active usersand 483 million daily active users as of Dec. 31, 2011.
Facebook held its initial public offering on May 18, 2012 and it was the largest technology IPO in U.S. history at that time. Facebook offered 421,233,615 shares for $38 per share and raised $16 billion through that offering, a record at the time.
Expectations were sky high with all the hype surrounding the social mediagiant's IPO. But it became apparent almost immediately that the results were going to be lower than expected. The stock fell right at opening, and share prices plummeted more than 40% over the next several months. Losses totaled $50 billion by August 2012.
A lot of the lack of confidence in the stock came from within because 57% of the shares sold in the IPO were from Facebook insiders. Another factor in the stock's falling price was the decision by General Motors to pull $10 million in advertising from Facebook due to ineffectiveness.
Facebook Inc. officially changed its company name to Meta Platforms Inc. on Oct. 21, 2021. Its stock ticker subsequently changed from FB to META.
NASDAQ Glitch Cost Investors
Facebook's initial IPO price was raised to between $35 and $38 just before going public. Heavy demand was cited. But a glitch in NASDAQ’s electronic trading system delayed some investors from selling the stock on its first day of trading when the stock price fell. Investors stuck with huge losses sued, and NASDAQ eventually paid a $10 million fine over the botched IPO debacle.
Facebook focused heavily on its mobile platform in the years following its IPO, which helped boost the company's revenue. Meta Platforms now joins other tech giants with a $500 billion or more market capitalization via acquisitions of popular social networking platforms like WhatsApp and Instagram.
Leading Up to the IPO
Facebook was initially launched as a platform for Harvard students, but it expanded and gained close to a million registered users by 2004. Anyone who was at least 13 years old could then sign up. But Facebook’s skyrocketing debut was marred in 2004 when Divya Narendra, Cameron Winklevoss and Tyler Winklevoss sued Mark Zuckerberg, alleging that Zuckerberg stole the Facebook idea from them while they were all students at Harvard. The suit was settled for $65 million in 2008.
Zuckerberg was initially opposed to taking Facebook public but the platform had become too big to be maintainable as it was and it had too many shareholders.
Meta (formerly Facebook) has become the dominant social media platform on the planet, with over 2.93 billion monthly active users worldwide as of 2022.
Facebook's Funding History
Funding is an ongoing process. A company must go through several stages of funding before it can open an IPO.
Facebook’s first significant funding was $500,000 from Peter Thiel just after Facebook was incorporated. This was followed by $12.7 million from Accel Partners, then $27.5 million from Greylock Partners and Meritech Capital in 2005. Facebook then raised approximately $240 million from Microsoft. It reached the shareholder threshold beyond which it couldn’t remain a public company.
Facebook's Top Shareholders
Mark Zuckerberg owned more than 831,706 Class A shares and more than 349,745,790 million Class B shares in 2022, according to Meta’s annual report filed with the U.S. Securities and Exchange Commission.
Sheryl K. Sandberg held 1,497,582 Class A shares at the time of the report, followed by Christopher K. Cox with 374,153 Class A shares. Rounding out the top five shareholders were Javier Olivan with 110,332 Class A shares and David M. Wehner with 107,119 shares.
Sandberg was Facebook’s chief operating officer before Olivan took the role in 2022. Cox is the company’s chief products officer, and Wehner served as chief financial officer through October 2022.
If You Had Invested in Facebook After Its IPO
You would have 26.3 shares ($1,000 divided by $38) if you had been able to purchase one thousand dollars worth of shares at $38. Shares of Facebook Incorporated closed at around $232 on May 5, 2023. Your shares would therefore be worth $6,101 for a 610% gain.
But Facebook's shares didn't staircase higher for a period initially following the IPO. Instead, the stock slumped over $20 from the IPO price to just $17.55 per share on Sept. 4, 2012. Your return on investment would have been -53.82% at this low. Some analysts and traders believed the company wasovervaluedand the IPO was priced too high, which led to the crash.
What Was Facebook's All-time High?
Facebook's stock closed at an all-time high on Sept. 10, 2021 as of May 5, 2023, reaching a price of $378.69.
Has Facebook Stock Split?
No, Facebook (Meta) has not yet had a stock split.
What Was the Largest IPO of All Time?
The largest IPO is the oil giant Saudi Aramco, which raised an astounding $25.6 billion when it went public on Dec. 5, 2019.
The Bottom Line
The tech giant's IPO got off to a rocky start, but the company turned the tide and has seen significant growth in the years since. Meta should continue to be a dominant player in the tech and social media industries with strategic acquisitions such as Instagram and WhatsApp, with a stock price that is expected to continue growing.
