Facebook Shares Finally Climb Back Above IPO Price
In the months following Facebook's initial public offering last May, one thing seemed clear to everyone: Its IPO price of $38 had been way too high.
The company was plagued from the outset with questions about revenue streams and whether it had made the proper disclosures during its IPO roadshow. The share price eventually dwindled to half its original value, and early adopters were left feeling like they'd made a bad bet.
Well, a funny thing happened Wednesday, 14 months after that disastrous IPO: The social network managed to claw its way back up past $38.
Facebook hit the symbolic milestone after a week of great news that kicked off with its most recent earnings report, which beat expectations in a big way. Revenue exceeded analysts' estimates by a cool $200 million, bolstered by big uptick in the company's ability to monetize its mobile business.
And Facebook's finding other ways to make money. Bloomberg reported Tuesday that it plans to start selling 15-second video ads, which could go for as much as $2.5 million a day. While Facebook users probably won't be thrilled to see commercials popping up on their news feeds, it looks like investors are on board with any plan that could squeeze more revenue out of the free service.
All told, the string of good news has propelled the share price upward by more than 40 percent in the last week.
That doesn't mean that it's going to be all sunshine and roses for shareholders going forward.
Facebook isn't as popular with young people as it used to be, even acknowledging in its most recent annual report that its younger users "are aware of and actively engaging with other products and services similar to, or as a substitute for, Facebook." It has attempted to fight against that tide by acquiring one of those competing services, Instagram, for $1 billion last August. It also created its own versions of popular upstarts Vine and Snapchat in the form of Instagram Video and Facebook Poke, respectively.
Whether those redoubled efforts to stay relevant will keep the business successful remains to be seen. But for now, those who bought Facebook on day one and held on can finally feel vindicated.
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.