Trading houses and brokerages expect Facebook’s initial public offering, the second-largest U.S. debut ever, to stoke heavy volume in the stock market on Friday.
The social-media giant was to start trading around 11 a.m. EDT on the Nasdaq OMX Group exchange, which has tested its IPO auction systems four times in the past week to make sure the company’s debut will go off without a hitch. Last week, Neil Catania, chief executive of brokerage firm MND Partners, projected that as many as 600 million shares of the stock could change hands.
That would make it the most highly traded initial public offering ever, above the prior record held by General Motors, which saw 458 million shares trade the day of its offering. A 600-million-share volume would also place it in the top 50 trading days ever, excluding trading in Citigroup and Bank of America during the financial crisis.
On Dec. 17, 2009, 3.8 billion shares of Citigroup traded hands, the most ever for a single trading day. Those stocks were trading for extremely low historical prices during their highest-volume days, which made trading large lots relatively cheap. Facebook, on the other hand, priced its offering at $38 yesterday, the higher end of its range.
Traders expect the company’s IPO to rev trading volumes for some time, which would be much welcomed by many in the market after anemic levels of shares changing hands so far this year.
The first quarter of 2012 saw the lowest average volume since 2007, and fell 14.5% from the same quarter the prior year. April was better, but not by much–trading fell 8% from 2011 levels.
One reason for the low volume is that the market has seen fewer initial public offerings. IPO levels are roughly a sixth of where they were in the 1990s, according to Credit Suisse Group. And according to data from Ipreo Capital Markets, they are still in decline. Deals fell year-over-year for January through April.
Sean Kelly, a managing director with Knight Capital Group, said the stock offering could generate some much-needed excitement from retail investors. “If it goes well and people make some money, it could bring the retail investor back into the market,” he said.
However, not all traders are so optimistic.
“I think Facebook is going to be positive for the market,” said Stephen Carl, head equity trader at Williams Capital Group. “I just don’t know how much of a spark it will give overall.”