While Facebook has already gone down in history as one of the great initial public offering flops, history also shows that the social media IPO dog could eventually hunt.
Facebook is a rare failure among IPOs and, especially, large IPOs. On average, they trade up by 20 percent on day 1, according to Jay Ritter of the University of Florida, a leading expert on IPO performance.
That compares with Facebook’s flat performance on Day 1 and near-11 percent decline on Day 2. Only one in four of all IPOs start flat to down, putting Facebook in a unique group of losers.
CNBC asked Ritter to run some numbers: How do IPOs perform six-months out based on how well they come out of the chute?
The initial conclusion is not promising for Facebook shareholders. IPOs that close down on Day 2 return 3.9 percent to shareholders after 6 months, underperforming the market for similar sized companies by 2.7 percent.
IPOs that pop out of the chute return 8.1 percent, beating other companies by 2.5 percent.
But CNBC asked Ritter to go further and look at the numbers based on company size, since his earlier work showed differences in overall IPO performance based on total revenue. Ritter came back with a bit of hope for retail investors who bought Facebook.Page 1 of 3 | Next Page