Post date: Jun 01, 2012 6:46:25 AM
With a drop in market value of nearly $22 billion since the May 18 close of its market debut, Facebook has lost more market cap than any member of the Russell 1000, according to a note from Bespoke Investment Group.
Facebook shares close at 28 dollars (USD) a share, a drop of roughly 10 dollars a share from the social media giants much anticipated IPO launch.
NEW YORK CITY, NEW YORK, UNITED STATES (REUTERS) - Facebook shares continued their recent price plunge on the Nasdaq on Wednesday (May 30), closing at $28.19 (USD), a drop of 65 cents per share, or a 2.3 percent decline on the day.
The decline does not come as a surprise to Scott Kessler, an equity analyst at Standard & Poor's Capital IQ.
"You've had a continuous drumbeat of negative information and not a lot of positives to be found. In that context, particularly when this, from the start, was a company that we viewed as having significant investment risks and a stretched evaluation. What has happened, while it's I think pretty surprising to some, makes some sense to us," said Kessler.
Wall Street has harbored concerns that Facebook, while boasting nearly a billion users worldwide and dominating Internet social-networking, would have difficulty translating its growing presence on smartphones and other mobile devices into revenue. Rivals Google Inc and Apple Inc currently dominate the mobile arena.
"Clearly over the last couple of weeks questions about the company's fundamentals have arisen - I think there have been some high-profile companies and comments about monetization in the Facebook business that have caused people to kind of wonder about the future of the growth trajectory for the company and profitability," said Kessler.
Days before Facebook's debut, General Motors announced it was pulling out of paid advertising on the social network, citing Facebook's unproven track record and echoing potential concerns about the lack of evidence that advertising on Facebook yielded strong returns on investment.
Facebook's quest to monetize mobile is spurring widespread speculation over its next moves. Technology bankers say the company would benefit from tacking on mobile operating software through an acquisition of Norway's Opera, which has been on the auction block for a while.
Facebook debut after an IPO that raised $16 billion was to have been the culmination of years of breakneck growth for the cultural and Internet phenomenon. But a software error on Nasdaq OMX Group Inc's U.S. exchange delayed the start of trade by 30 minutes.
"Clearly what went on in terms of the Nasdaq and the late opening of the shares and some of the issues in terms of communication and execution, it really caused people to kind of be scared I think about, at least initially, how the stock was not trading and then how it was trading," said Kessler.
Then, claims of selective disclosure in the days leading up to the IPO about Facebook's slowing revenue growth engulfed the company in controversy, as did perceptions among some investors that the stock had been overpriced coming out the gate.
Skeptics had argued even before the botched debut and subsequent selloff that Facebook's starting valuation of more than $100 billion - about equivalent to that of Amazon.com Inc and exceeding that of Hewlett-Packard Co and Dell Inc combined - was too high for a company that posted $1 billion in profit on revenue of $3.7 billion in 2011.
Facebook stock debuted at over 100 times historical earnings versus Apple's 14 times. Despite that, many investors bet on a modest first-day pop for the company, which upended traditional technology and business models and is used by about one in seven people on the planet.