Facebook IPO: Investors ignored all the noise

Los Angeles: Maybe the dumb money wasn't so dumb this time.

The stock market did turn out to be a voting machine on Facebook on Friday (to quote Warren Buffett and Benjamin Graham), and the vote was thumbs-down on flapdoodle.

Market pros will be debating the lessons to be drawn from the disastrous first-day trading in Facebook's initial public offering. But one lesson is that when given enough information, investors can find their way through fogbanks of hype.

When a stock offering is as closely followed as Facebook's, it's much more likely that the shares will be fully valued than that they'll harbour hidden treasure.

Facebook went public at $38 (Dh139.46) a share, and after a day of epically heavy trading, closed at $38.23, for a gain of 0.61 per cent. Not quite the huge pop market mavens were predicting. The expected pattern is that public investors — "dumb money" in Wall Street regard — react more to hype than to fundamentals.

That's why savvy Wall Street traders take it as a bearish signal when small investors pile into a stock or the stock market.

This time the expected frenzy didn't materialise.

—Los Angeles Times