I’m not usually the go-to guy to talk about the stock market, but allow me to quietly guffaw at Facebook’s disastrous second day on Monday as the newly-public company’s stock lost 10.99 percent of its price at the end of trading on Friday. Making matters worse, Friday’s closing price was reportedly artificially pumped up by interested parties when it looked like the stock might end its first day below the asking price of $38 per share. From SiliconValley.com:
Friday reports said the banks that underwrote Facebook’s IPO stepped in to buy stock when shares dipped near $38 on the first day of trading in order to ensure the stock closed above that level.
Without the help of the IPO underwriters, Facebook shares opened Monday at $36.53, but that price immediately dropped to below $36; in the first 30 minutes of trading, shares sold for as low as $33, a decrease of 13.7 percent from Friday’s closing price. Facebook stock closed at $34.03, 11 percent off Friday’s closing price and more than 10 percent lower than the price investors paid for IPO shares.
Confounding those bullish on Facebook stock even more was Wall Street’s overall strength Monday: All three major U.S. stock indexes rose at least 1.1 percent, led by the tech-heavy Nasdaq composite index at 2.5 percent.
I know, I know. I shouldn’t take such glee in another’s misfortune, but a) I tend to root against tax–evading billionaires, and b) I just spent two hours trying (unsuccessfully) to undo Facebook’s new and apparently unchangeable privacy setting that allows stories I’ve “liked” to be seen by the friends of my friends, instead of just my friends, opening up my personal information to thousands, if not millions, more people than I would like, meaning that I won’t be able to use the convenient Like button anymore. Worse, millions of people who don’t pay attention to their privacy settings won’t even notice the change, which is exactly what Facebook is counting on. Gotta make the advertisers happy, after all.
I’m sure Facebook’s stock price could even out or even go through the roof today. For now, though, ha ha, Facebook. Ha ha.
[yframe url=’http://www.youtube.com/watch?v=aIrhVo1WA78′]
There, I feel better.
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To be fair though, the stock exchange suffered some glitches on Facebook’s opening day. I believe that’s the reason the banks stepped in and inflated the price at one point. There were technical problems with many trades not processing without long delays, and investors couldn’t tell if they should continue buying shares, or sell what they had, because there was no accurate real-time data coming through. I believe the Facebook IPO didn’t even start until about 30 minutes after the scheduled time, because of all the issues.
I think reality is, they probably managed to pretty accurately valuate the stock when they placed an opening price on it, so nobody saw a huge surge in price like we saw every time a dot-com IPO happened in the late 90’s.
I’m not much of a stock analyst either — but I think it’s a fair bet to say people are much more cautious these days with internet-based businesses. Facebook is, really, in a similar position Google was in back when they went public; a service used by MANY, MANY people but couldn’t really explain how they were going to monetize it, other than the typical “we sell paid advertising!” line.
Google got lucky because when THEY went public, people still believed “If you build it, profits will come!” if it existed online, and their stock value gave them the ability to buy enough other valuable products and services to add real worth. I think Facebook is trying to copy-cat that today, but Internet search and cloud-hosted business applications and email will probably prove easier to turn a clear profit on than people posting the latest pics of their pets and what they’re eating for dinner. :)