Is that all there is?
After weeks of anticipation and talk of Facebook instantly running up to $50 a share amid frenzied buying, the stock instead made a little effort to climb after becoming a publicly traded company Friday, and then hovered close to where it began its stock market debut — at $38.23 versus the $38 opening price.
The early investors, who provided Facebook private funding it needed over the last few years, did fine — cashing out at a remarkable price for a young, untested company. But this was not an exciting IPO.
The good news, of course, is that Facebook fans didn’t get as carried away in the stock market as some feared. So in the weeks ahead, if Facebook slumps like most other social media stocks have after recent IPOs, novice investors won’t be bruised as badly as thought.
Still, bruising seems likely. Kathy Shelton Smith a principal of Renaissance Capital, says new offerings this year have been fighting market fear. Investors can’t get past the gloom that continues popping up as Europe struggles with debt and recession, and the U.S. economy remains too lame to spark new jobs.
As the week closed Friday, market strategists and economists were busy trying to calculate just how bad conditions might become if Greece leaves the eurozone. JPMorgan Chase & Co. has placed the possibility at 50 percent and estimates a sharp recession in Europe if it happens.
It would mean a “three-quarters of a percent hit to global GDP growth,” said JPMorgan economist Joseph Lupton. Asia would be hit hardest because it depends on Europe to buy its products.
The biggest risk seems to be in the banking system and the uncertainty that would send fear into the markets. Analysts assume that if Greece leaves the eurozone, there will be a run on Greek banks as people take their euros and avoid drachmas. Similar concerns would probably ignite runs in other eurozone countries such as Portugal and Spain.
JPMorgan assumes investors would seek safety in U.S. Treasury bonds, lowering yields to a remarkable 1 percent.
Meanwhile, Stephen Cucchiaro is intrigued by the mixture of fear and Facebook speculation.
“On the one hand people are so frightened they will accept yields of 1.7 percent now in U.S. Treasurys,” said Cucchiaro, chief investment officer of Windhaven Investment Management. “On the other hand, they will pay $38 to speculate on a company priced at almost 100 times earnings. It’s almost like buying a lottery ticket and hoping for growth. People are very conflicted. They want to be optimistic.”