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Dublin: 3 °C Sunday 23 November, 2014

Here’s why Facebook shares stayed above $38 after flotation

Throughout the first day of trading, Facebook shares never dipped below $38. This chart shows why.

Image: AP Photo/Paul Sakuma/PA

After a white-knuckle final 20 minutes of the day, shares of Facebook managed to just keep one nostril above $38, the level where the IPO priced last night.

Why did it never fall below $38?

Basically, because the underwriters of the IPO (Morgan Stanley, et al) bid heavily right at $38 to make sure there was no chance that selling pressure would drive the stock lower than that level. It would be an embarrassment if their clients lost money on their first day of the IPO.

The below table gives a good look at what’s going on.

On the left side, you see the “bids” that are in the market for the stock. Those are the offers to buy. On the right you see the “asks”, which are asking prices by sellers.

Note that next to each bid or ask there’s a “size” which is the size of the offer to buy or sell.

Note two things: At the top of the left column, you see lots of bids at $38.00 on various trading platforms. (The BATS exchange, Arca, etc.). What’s more, the size of those bids are HUGE.

Hundreds of thousands of shares compared to relatively tiny asks and bids everywhere else. So basically, there were really big, honkin’ buyers ready to stand and protect $38, no matter what.

(Thanks to Twitterer @bourbon_meyer for the chart)

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Business Insider
Business Insider is a business site with strong financial, media and tech focus.

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