Facebook's Flop: Why Stock's Early Slump May Not Matter
CNBC Senior Economics Reporter
What the data seem to show is that small companies don’t get second chances but larger companies do.
Influences on the share price of IPOs after the offering including the eventual withdrawal of support in the secondary market from underwriters, eventual filings of earnings reports and the end of lock-up periods, allowing insiders to sell their stock.
So as each day goes by, the share price of Facebook will increasingly rise and fall on its actual performance and the broader market as fund manager lump it in with stocks of similar size and in similar businesses.
One notable IPO flop, Refco IPO’d at $22 and shot up to $27.48 on Day 1. Six months later, the stock was trading on the pink sheet at 80 cents after revelations of accounting fraud.
From the other side, the mining concern Molycorp came out of the chute at $14 and sank 13 percent on Day 1 to $12.23. But six months later, it had bounced back to $46.81.
As for Ritter, he received a 400 share allotment of Facebook and plans on holding on to the shares.
-By CNBC's Steve Liesman