It was supposed to be the IPO of the decade: a soaring success that would finally shake Silicon Valley out of its doldrums and pave the streets with gold.
Instead, Facebook's initial public offering one year ago today was derided as "the Faceplant." Shares of the Menlo Park social network dropped almost as soon as they began trading in a debut marred by glitches with the Nasdaq trading system. In the months since, they've never approached their underwhelming first-day close of $38.23
"Looking back one year later, the Facebook IPO was an unmitigated disaster," said Andrew Stoltmann, a Chicago securities attorney who had warned that inexperienced stock-buyers could get caught up in the hype
That May morning's reverberations are still being felt -- in the tech community, the IPO market and the company itself
Criticism aside, the biggest tech stock offering of all time did raise $6.8 billion for Facebook's coffers. Founder and Chief Executive Mark Zuckerberg has used that war chest to push the company into new products and lines of business.
"I'm still roughly as bullish as ever," said David Kirkpatrick, author of "The Facebook Effect." He pointed to additional features such as Graph Search and the growth of Instagram, which the company bought last year, as signs that "product development is alive and well."
This month, Facebook surprised analysts with news that mobile revenues -- a category that didn't even exist a year ago -- represented nearly a third of its advertising sales, which were up significantly over the year-earlier period
Still, the share price barely budged
Analysts worry about the slowing growth in Facebook's revenues and its billion-strong user base. Other concerns include popular new messaging competitors such as WhatsApp that have lured away younger users, as well as Facebook's own highly touted mobile product, Facebook Home, that landed with a thud
"Part of the issue is their move-fast approach to product development," said Gartner analyst Brian Blau. "Maybe they need to slow down just a bit, really get the products right."
Some on Wall Street also fret over high-profile extracurricular activities on the parts of Zuckerberg, who has launched a lobbying organization called FWD.us, and his top lieutenant, Chief Operating Officer Sheryl Sandberg. She has recently sparked a cultural phenomenon with "Lean In," her book about the challenges women face in the workplace
"Then again," said Kirkpatrick, "Zuckerberg sees the core mission of the company to 'make the world more open and connected.' And in his view, the trajectory toward that is not much interrupted by either 'Lean In' or FWD.us."
But while Zuckerberg exudes confidence that Facebook's business momentum can continue, the company's Wall Street flop undoubtedly drained momentum from the valley's broader startup scene
"Late last year, we definitely felt the blow-back from the faulty Facebook IPO," said Geoffrey Woo, co-founder of a mobile service, Glassmap, that helped smartphone users see one another's locations. "Investors were less willing to take a gamble," especially on social networking
Mountain View-based Glassmap reinvented itself as a service to help businesses reach nearby customers via mobile phone; in January, the company was acquired by Groupon, another social media heavyweight that has struggled since going public
Woo said most of his entrepreneur friends likewise have shifted away from consumer-facing startups to focus on business customers. Investors are opening their checkbooks; in fact, some venture capitalists say competition for enterprise software deals is now as overheated as social media was two years ago
Paul Madera, a venture capitalist at Palo Alto's Meritech Capital who was an early Facebook backer and a nonvoting member of its board until the IPO, acknowledges that the stillborn stock debut hurt other companies that had been hoping to go public -- at least, for a time
"I think we all had big expectations, and certainly the froth built on itself," he said. "It culminated in the perfect storm of bad events."
Those included claims that lead underwriter Morgan Stanley gave warnings to select clients about the company's finances that smaller buyers didn't receive; lawsuits are pending
Madera argues that Facebook's stock, which hit a low of $17 in September, has finally settled into a fair valuation. In the past three months, it has bounced between $25 and $29, closing Friday at $ 26.25
As for the broader IPO market, he noted, it has resumed activity after several dormant, post-Facebook months. "We've had good, healthy companies continue to come out," Madera said
Few, though, have been consumer Internet companies. And Madera acknowledged that it will take time for the market to fully regain investor confidence that first began to sag during the 2008 global credit crunch
As for Meritech, which still holds a good portion of its Facebook shares, the IPO was an unmitigated win. Madera said the return on his investment more than doubled the size of the $425 million investment fund his firm raised in 2006
"It probably is the most impressive company I've ever been involved with," he said. "We have great expectations for it to continue to grow."
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.