Facebook Finally Returns to Its IPO Price

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By Seth Fiegerman2013-07-31 13:37:18 UTC

It only took a little more than a year, but Facebook stock has finally returned to its IPO price of $38 a share.

The stock flirted with the $38 mark in trading Tuesday, coming within four cents before ending the day at $37.63, a gain of more than 6% on the day. Facebook topped $38 in pre-market trading and opened at $38.22, its first time trading above its IPO price since going public on May 18, 2012.

See also: How Facebook Has Changed Since Going Public 1 Year Ago

Facebook received a late afternoon bump from a report in Bloomberg that reasserted the social network is planning to sell TV-style commercials on its site for as much as $2.5 million a day. Much of the stock's upward momentum, however, is due to its impressive earnings report from last week, which revealed better than expected progress on mobile user growth and ad revenue.

Facebook was one of the most hotly anticipated public offerings in recent memory, but the stock has been plagued by investor concerns about the company's ability to adjust to and profit off users' continued shift to mobile devices. Some of those concerns stem from Facebook's decision to revise its revenue estimates downward shortly before the IPO, noting that it wasn't serving enough mobile ads to keep pace with users moving to smartphones.

In October, shortly after Facebook's stock hit its all-time low of $17.55 a share, CEO Mark Zuckerberg took to the earnings call to argue that Facebook's mobile problem was little more than a myth. "We're just getting started," he said at the time.

Sure enough, mobile ads accounted for 14% of total ad revenue that quarter, 23% the next quarter and 30% the quarter after that. In the most recent quarter ending in June, analysts had expected that percentage to climb to about 33%, but Facebook surprised analysts and investors by reporting that mobile ads now account for 41% of total ad revenue — a remarkable number when you consider that it was essentially 0% a little more than a year ago.

"The results should put to rest many of the concerns that so many investors have had since the IPO, broadening the stock's investor base," Brian Wieser, a senior analyst at Pivotal Research Group, wrote in an investor note shortly after the earnings. "Fretting about Facebook as the next MySpace will probably go the way of MySpace."

Since releasing its second quarter earnings a week ago, Facebook's stock has surged more than 40%, adding more than $25 billion to the company's market cap.

FB data by YCharts

Facebook is still below its all-time high of $45 a share, which it hit briefly on its first day of trading, but passing its IPO mark is significant for investors who may have refrained from investing previously, as well as for the morale of employees at the company.

For anyone who invested in the early days though, it's not quite fair to say that early Facebook investors have broke even. The S&P 500 index increased 30% during the period since Facebook went public. After a long and rocky road, Facebook stock has now increased by precisely 0%.

Image: Justin Sullivan/Getty Images

Topics: Business, Facebook, IPO, stocks