Facebook closes at $38.23 first day NASDAQ trading, above IPO price $38.00

It's the only manipulative practice allowed by the SEC because of the need to "maintain a fair and orderly market". This article describes it fairly well in its abstract: http://economics.ouls.ox.ac.uk/10713/1/IPOstabilization.pdf.

"Stabilization is the bidding for and purchase of securities by an underwriter immediately after an offering for the purpose of preventing or retarding a fall in price. Stabilization is price manipulation, but regulators allow it within strict limits - notably that stabilization may not occur above the offer price. For legislators and market authorities, a false market is a price worth paying for an orderly market."

EDIT: Just included the full description.

Speculating is not about what you think will happen. It's about what you think other people think will happen. It's about the market, not the inherent value of the stock.

Good investing is about buying into something you think is undervalued.

If a business has been "shown" to be profitable and stable, as you say, then its stock price will be high enough to reflect that, and it's probably not undervalued, unless you know something special about it. All you can expect it to receive a steady small stream of dividends, or sell the stock sometime in the future for roughly the same amount you paid for it originally. That's not really "investing", that's just swapping cash for stocks. Save yourself some risk and just put your money in an index fund instead.

I'm glad about this.

If we had trading that quickly doubled or tripled the market cap then that may well be evidence of unsustainably high valuations (I hesitate to use the word "bubble" [1] as it's largely a baseless pejorative at this point).

That being said, some say this is evidence of FB being fairly priced. I disagree on two points:

1. Pre-IPO investors expect an immediate return. Investment banks ("IBs") underwriting IPOs will be selling those shares to their most valued clients (in large part). Those clients expect an immediate return. Also there is a nontrivial number of "stag" investors in IPOs (investors who do first-day sales to trade on this bump);

2. The IPO itself can in large part in set the tone. A stock that jumps 50% on IPO sets expectations as a stock that's going places. A stock that drops can have everyone for the hills and a stock that's level can just make everyone nervous (becoming a prisoner's dilemma);

3. There's evidence the IBs are propping up the stock at issue price levels; and

4. Current investors will have a lock-out period from selling. This may be 6 or 12 months. Whatever the case, if supply meets demand now then extra supply suggests a price drop may be coming when that lock-out period ends.

Consider this: Even Groupon jumped 25% on first-day trading.

Now I'm not predicting doom and gloom here. In all honesty I have no idea what will happen with the stock. I do consider it a high-risk investment at this point and personally I wouldn't touch it. YMMV. It may still be spectacularly well. OTOH it could be the Beijing Olympics of the tech sector (the Beijing Olympics being essentially the turning point of the economy in 2008).

Trading at a P/E of ~100:1 is high risk. Make no mistake. Facebook has important strategic issues they need to deal with.

Anyway, to those early employees, congratulations. This will change the life for many (and already has). I'm particularly glad to see that Zuck didn't pull a Pincus [2]. This speaks highly of him IMHO.

[1]: http://news.ycombinator.com/item?id=3987892

[2]: http://online.wsj.com/article/SB1000142405297020462190457701...

We saw ~125% volume today, meaning that 125% of the shares that were for sale were sold (some were obviously sold twice.

I would assume this means that all of the stock was sold, meaning, with a valuation of ~104 at close, Facebook raised ~16 billion.

Layperson question: what does it matter? What impact does Facebook's valuation have on its day-to-day business, now that they have the IPO cash in hand?