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Facebook shares fall sharply on second day of trading on Nasdaq
Facebook shares fall sharply on second day of trading on Nasdaq
(10 days later)
Facebook shares have fallen sharply on a second day of trading, leading to questions about the valuation of its IPO and the handling of the sale by its bankers.
Facebook shares have fallen sharply on a second day of trading, leading to questions about the valuation of its IPO and the handling of the sale by its bankers.
At the close of business on Monday, shares in the social networking site were off more than 10%, down to $34.03 from the initial price of $38. The market value of the firm took a $10bn hit as a result of the slide.
At the close of business on Monday, shares in the social networking site were off more than 10%, down to $34.03 from the initial price of $38. The market value of the firm took a $10bn hit as a result of the slide.
The slip appears to confirm the views of analysts who said Friday's flotation was overvalued. Questions were also being asked of Morgan Stanley, Facebook's bankers, who provided the advice that led to Facebook increasing the number of shares for sale and raising the opening price just ahead of the flotation.
The slip appears to confirm the views of analysts who said Friday's flotation was overvalued. Questions were also being asked of Morgan Stanley, Facebook's bankers, who provided the advice that led to Facebook increasing the number of shares for sale and raising the opening price just ahead of the flotation.
"The underwriters completely screwed this up," Michael Pachter, an analyst at Wedbush Securities, told the Wall Street Journal. He said Facebook ought to have offered far fewer shares: the social network decided on Wednesday to increase the potential number of available from 388m to 484.4m.
"The underwriters completely screwed this up," Michael Pachter, an analyst at Wedbush Securities, told the Wall Street Journal. He said Facebook ought to have offered far fewer shares: the social network decided on Wednesday to increase the potential number of available from 388m to 484.4m.
Executives at the Nasdaq stock exchange also expressed their embarrassment at ongoing technical problems. The chief executive, Robert Griesfield admitted that a delay to the start of the sale on Friday was "not our finest hour". About 30m shares were affected by the delay, he said.
Executives at the Nasdaq stock exchange also expressed their embarrassment at ongoing technical problems. The chief executive, Robert Griesfield admitted that a delay to the start of the sale on Friday was "not our finest hour". About 30m shares were affected by the delay, he said.
Morgan Stanley's brokerage affiliate, Morgan Stanley Smith Barney, which handled the sale for Facebook, still has a "large number" of market orders that have still not been reconciled
Morgan Stanley's brokerage affiliate, Morgan Stanley Smith Barney, which handled the sale for Facebook, still has a "large number" of market orders that have still not been reconciled
When trading finally began Friday, shares briefly climbed before beginning a slow descent back to the initial asking price. The slide continued on Monday. At one point in early trading, the stock price dropped to $33.
When trading finally began Friday, shares briefly climbed before beginning a slow descent back to the initial asking price. The slide continued on Monday. At one point in early trading, the stock price dropped to $33.
It rallied briefly to $36.66, but slipped again, ending the day at a touch over $34 – down just under 11% on its opening price.
It rallied briefly to $36.66, but slipped again, ending the day at a touch over $34 – down just under 11% on its opening price.
"There must have been some sober second thoughts about this," explained Brian Wieser, a market analyst at Pivotal Research Group. Wieser suggested that a fair price for the stock would be $30.
"There must have been some sober second thoughts about this," explained Brian Wieser, a market analyst at Pivotal Research Group. Wieser suggested that a fair price for the stock would be $30.
John Lonski, chief economist at Moody's Capital Markets Group, said: "When you start the downward momentum it can be difficult to turn it around unless there is a positive surprise pertaining to the company itself."
John Lonski, chief economist at Moody's Capital Markets Group, said: "When you start the downward momentum it can be difficult to turn it around unless there is a positive surprise pertaining to the company itself."
Lonski suggested that the IPO price tag – which had valued the company at $104bn – had been buoyed by over-enthusiasm surrounding the launch. "Investors were being swayed more by hype than by underlying long-term value," he said.
Lonski suggested that the IPO price tag – which had valued the company at $104bn – had been buoyed by over-enthusiasm surrounding the launch. "Investors were being swayed more by hype than by underlying long-term value," he said.
"The truth is that in the hi-tech sector, nobody really knows what the predominant product might be five or ten years from now." As a result, many had underestimated the stock's risk, Lonski suggested.
"The truth is that in the hi-tech sector, nobody really knows what the predominant product might be five or ten years from now." As a result, many had underestimated the stock's risk, Lonski suggested.
Despite Facebook's share price fall, the Nasdaq index ended the day up 2.46% to 2847.21, as US stocks rebounded from their worst week in a year.
Despite Facebook's share price fall, the Nasdaq index ended the day up 2.46% to 2847.21, as US stocks rebounded from their worst week in a year.
Apple was among the market risers. Stocks in the computing giant bumped up by almost 6% in trading Monday, to $561.28.
Apple was among the market risers. Stocks in the computing giant bumped up by almost 6% in trading Monday, to $561.28.
Comments
29 comments, displaying first
21 May 2012 11:03PM
Thin air worth less than it was yesterday eh?
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21 May 2012 11:16PM
Aside from a few billionaires, who cares?
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21 May 2012 11:17PM
Double, double, toil and trouble: But goddammit, we got no bubble.
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22 May 2012 12:26AM
@bugbuster: the people who really suffer are those whose pensions get invested in this crap by the funds moronic rules which say they need to hold things with a certain market cap regardless of whether it actually has any underlying substance.
Any fool could see the shares would fall but to have got there in the first place must have involved institutional investors I suspect.
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22 May 2012 12:58AM
FB's IPO is clearly the insider's selling out and getting money from outsiders. People realize that the money being raised in this issuance is earmarked for the original investors and not for investment. Does that mean that they no longer have faith to keep their fortunes in an expanding enterprise, but rather cash out and let someone else hold the risk and reward? (Indeed).
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22 May 2012 1:42AM
Anybody who bought shares in Facebook is a brain-dead consumer-clone.
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22 May 2012 3:38AM
we told you. The guardian bloggers are so sharp!
The big "whales" drunk the Koolaid. Its a disgrace. Institutional investors with OUR money!
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22 May 2012 4:36AM
Facebook never was going to be worth more than Shell Oil though was it..
Madness. I wouldn't pay a dollar a share
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22 May 2012 6:01AM
Who bought these shares?
I have some timeshares in Syria I want to off load.
Link to this comment:
22 May 2012 6:55AM
hee, hee, hee.
These comments on this thread are brilliant.
Follow the herd to slaughter....
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22 May 2012 7:14AM
Goldman Sucks (again).
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22 May 2012 7:35AM
Facebook is essentiallty a bet on one guy with little experience, massive PR hype and pretty well absoulte power (Zukerberg) never screwing up badly. Chances of that are 10% at best. So in 10 years time the company will probably be worth book value. At present it should at most be on a PE somewhere around Yahoo (17.6) and less than Google (18.6). But even after yesterday's fall it's on a PE of 109. So the shares have a LOT further to fall.
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22 May 2012 8:03AM
the IPO price tag – which had valued the company at $104bn – had been buoyed by over-enthusiasm surrounding the launch
You don't say? And where are The Guardian's online cheerleaders this morning?
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22 May 2012 8:08AM
We are in the middle of the worst financial crisis since the thirties brought about by sheer greed and ruthless, unethical management and they decided to float 'Facebook' at 38usd. a share. Nothing has changed. Sorry investors, you've been had! P.S. Can any sane person tell me how they arrived at this 38usd. starting price (which they strangely increased to from 34usd. a few days before the float.).
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22 May 2012 8:23AM
well what a surprise
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22 May 2012 8:24AM
Someone has done their b@llocks
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22 May 2012 8:34AM
Could this be the biggest ponzie scam ever?
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22 May 2012 8:50AM
Goldman Sachs spent the past year or so creating a private market in unlisted Facebook shares and then hyping them up so that they could blow up the bubble further and cash out at the top.
Given that they know all of their muppet customers hate them anyway and that the regulators will do nothing because they own them, they have nothing to lose and more bonuses to gain!
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22 May 2012 9:08AM
According to Barron's (quote) "at $38, Facebook trades for 76 times projected 2012 profits of 50 cents a share and 89 times 2011 earnings. " And shareholders are to have no say in the running of the company, thanks to the company's dual classes of stock,, that's left to a 28 year old with no proven previous experience.
My understanding is that Zuckerberg delegated the bank-selection process job to his Chief Financial Officer, David Ebersman who dictated to Morgan Stanley how to manage the IPO. as part of the deal that Morgan Stanley got the job.
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22 May 2012 9:52AM
This will do untold damage to the Californian Yacht Building industry!
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22 May 2012 10:21AM
I wouldn't pay that amount of money for Facebook shares; and indeed I feel sorry for the investors. Facebook has no "product" to sell; its "assets" are its users, but these are as loyal as a prostitute to a single client.
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22 May 2012 12:45PM
Whats the appeal of Facebook anyway? Go outside and make some real friends. And with that i'm off for a walk.
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22 May 2012 1:44PM
It was this or the crap tables to blow my wealth on. Crap tables it is!
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22 May 2012 2:53PM
FB fell to $31.03 soon after trading resumed this morning. Currently hovering around $32.
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22 May 2012 3:57PM
FB may have over 900 million users, but it does not have, and will not have 900 million, to help bring in the revenues. This is a fad until another one comes. Remember AOL buying TIme Warner?
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22 May 2012 4:51PM
This makes me happy. Happier still, that Bono lost money, too.
Turning everyone's life story into commodity..as if harvesting isn't enough...is their revenue from advertising falling short?
Link to this comment:
22 May 2012 6:17PM
Web bubble 2.0: bursts after one day.
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22 May 2012 6:46PM
Facebook is a Ponzi scheme and the market knows it.
If it was just a marketing ploy ahead of the IPO then the film's budget would have been peanuts compared to the amount of money made by the insiders on the float and would have been money well spent.
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Shares down to $34.03 from initial price of $38 amid criticism of Facebook's share value and Morgan Stanley's handling of sale
Facebook shares have fallen sharply on a second day of trading, leading to questions about the valuation of its IPO and the handling of the sale by its bankers.
At the close of business on Monday, shares in the social networking site were off more than 10%, down to $34.03 from the initial price of $38. The market value of the firm took a $10bn hit as a result of the slide.
The slip appears to confirm the views of analysts who said Friday's flotation was overvalued. Questions were also being asked of Morgan Stanley, Facebook's bankers, who provided the advice that led to Facebook increasing the number of shares for sale and raising the opening price just ahead of the flotation.
"The underwriters completely screwed this up," Michael Pachter, an analyst at Wedbush Securities, told the Wall Street Journal. He said Facebook ought to have offered far fewer shares: the social network decided on Wednesday to increase the potential number of available from 388m to 484.4m.
Executives at the Nasdaq stock exchange also expressed their embarrassment at ongoing technical problems. The chief executive, Robert Griesfield admitted that a delay to the start of the sale on Friday was "not our finest hour". About 30m shares were affected by the delay, he said.
Morgan Stanley's brokerage affiliate, Morgan Stanley Smith Barney, which handled the sale for Facebook, still has a "large number" of market orders that have still not been reconciled
When trading finally began Friday, shares briefly climbed before beginning a slow descent back to the initial asking price. The slide continued on Monday. At one point in early trading, the stock price dropped to $33.
It rallied briefly to $36.66, but slipped again, ending the day at a touch over $34 – down just under 11% on its opening price.
"There must have been some sober second thoughts about this," explained Brian Wieser, a market analyst at Pivotal Research Group. Wieser suggested that a fair price for the stock would be $30.
John Lonski, chief economist at Moody's Capital Markets Group, said: "When you start the downward momentum it can be difficult to turn it around unless there is a positive surprise pertaining to the company itself."
Lonski suggested that the IPO price tag – which had valued the company at $104bn – had been buoyed by over-enthusiasm surrounding the launch. "Investors were being swayed more by hype than by underlying long-term value," he said.
"The truth is that in the hi-tech sector, nobody really knows what the predominant product might be five or ten years from now." As a result, many had underestimated the stock's risk, Lonski suggested.
Despite Facebook's share price fall, the Nasdaq index ended the day up 2.46% to 2847.21, as US stocks rebounded from their worst week in a year.
Apple was among the market risers. Stocks in the computing giant bumped up by almost 6% in trading Monday, to $561.28.
