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Failure of Facebook Stocks has Affected IPO Decisions

 

The long expected Facebook IPO did not end very well. The very ordinary outcome of the offering is now showing its effects on other likely stocks to go public. Even worse, the shares of Facebook are now falling below 25% since opening. Many companies are now postponing or even rethinking the decisions to go into initial public offering.

Kayak is one of such companies. When contacted, the spokesperson confirmed they have postponed the IPO on Wednesday.  Kayak is an online travel website.

Another big jeweler, Graff Diamonds, has also halted its IPO process in Hong Kong. They were quoted as saying that the market conditions are not favorable to attract potential investors to their stocks.

It’s not that all public offerings are affected by the Facebook stock results. Due to the economic problems, most investors are sticking to their current stocks not feeling confident enough to invest in a new company becoming public. Investment experts are of the opinion that IPOs are the most uncertain investment offers in financial industry.

Many companies like BrightSource Energy and Aleris closed their public offerings altogether. Some that were successful, like Carlyle Group, had to price their stock low in order to achieve the targeted result. Offering stocks at discounts is a very traditional way of attracting new investors. However, due to the current havoc in investment industry, institutions interested in buying shares at discount prices are insisting on more protection against low priced offerings.

Facebook was this year’s biggest IPO raising $16 billion from a total of $29.1 billion by 73 companies overall. This counts for more than half of the current year’s activity.

There are a lot of companies who have put their IPO on hold. These include Intelsat; a satellite operator, Bloomin’ Brands; a steakhouse chain and Michaels Stores; a retail giant of arts and crafts. It is speculated that these companies are more likely to wait than selling their stocks for a price less than their market worth. They would rather sit back and wait till the market becomes stable. Many of these sellers are private equity firms who were initially interested to sell the minority stake of companies in their portfolio, ultimately benefiting cashing out their investments.

The hype that Facebook initial offering had created was expected to give a boost to revitalize the stock investment environment.  However, after over a week has passed, the offering is now serving as an example to other interested parties. The break in price came right the next day the stocks became public. Being offered at $38 a piece, the shares have seen their worse by falling to $28 on Wednesday.

Since the beginning of May 2012, a drop of $1 trillion has been observed by the U.S equities cumulatively. Facebook’s initial public offering is just a portion of that drop. Moreover Facebook’s valuation of $100 billion is also not seen by many as a very positive indicator.

It has been over a month since the markets are behaving awfully and corporate people are still observing close on the market trends.

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