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Facebook slammed again, down 24% since IPO

Shares down nearly 10% in one day; Facebook value down $25 billion since IPO

Financial trends and news by Steven Loeb
May 29, 2012 | Comments
Short URL: http://vator.tv/n/2714

Remember when Facebook was supposed to be the next big thing? Despite it raising $16 billion, the largest ever for a tech company, it ended its first day only 0.6% above its IPO price, and since then the stock has been nothing but a disappointment.

Today was no exception.

Facebook stock was slammed again Tuesday, going down 9.62% to end at 28.84, down over $3 on the day.

Facebook has seen shares go down four out of the first six days of trading. Shares are now down 24% from their initial public offering price of $38.

The steep stock drop has hurt the company, and its founder Mark Zuckerberg, financially.

At the time of its IPO, Facebook was worth $104 billion. Now that its stock has gone down nearly a quarter, the company itself has gone down $25 billion, and is now worth $79 billion.

Zuckerberg has also seen his personal stake go down around the same amount, falling from $19.1 billion to $14.5 billion since the IPO.

Troubled IPO

Facebook’s IPO was a mess from the very beginning, and may very well have involved illegal activity on the part of the company, which is being accused of colluding with its underwriters, including Morgan Stanley, JP Morgan and Bank of America, to defraud investors by only telling major clients about stock devaluations.

Those investors who were not informed that the Facebook stock was being devalued are suing Facebook, Zuckerberg and the underwriters for damages. Both Houses of Congress, the SEC and FIRA are all investigating.

One person who people are beginning to pay particular attention to is Jim Breyer, one of Facebook’s board members. Breyer, who is said to have made over $100 million from the Facebook IPO, is a board member on five different companies, Facebook, Dell, Walmart, News Corp and Brightcove. All but Brightcove are now facing “high profile problems," the New York Times reported this past Friday.

Newscorp is embroiled in a phone hacking scandal; Walmart is being accused of bribery in Mexico; and Dell is having major financial difficulties. 

Breyer more than doubled his shares of Facebook days before the IPO, as smaller investors who did not have the same knowledge saw their shares sink.

It is unclear at this time how Breyer's stake has been affected since the IPO.

On top of those problems was also the matter of the technical problems facing Nasdaq on the day of the IPO, which might have cost up to $100 million in trader loses. Nasdaq is also being sued.

Stock projections

Tuesday was the first day of option trading of the Facebook stock, and there was actually some good news sprinkled in. Not a lot, but Facebook should take what it can get at this point.

Options allow traders to bet on what direction the stock is heading in, whether it will hit a certain level by a certain date.

Unsurprisingly, most traders bet on Facebook stock continuing to fall, with some betting that the stock would hit $25 by July, the Washington Post reported on Tuesday.

The good news for Facebook is that most firms are saying that the stock is currently undervalued, and are recommending that clients bet on the stock hitting $40 to $48.

There were even some betting it would hit $65 by January 2014.

(Image source: tmz.com)


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