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Re: Shareholders Sue Facebook & Morgan Stanley-Stock Slumps
Facebook Stock Slumps for Third Day
Pre-IPO frenzy over as social net's stock sinks below $32 a share
By Sharon Gaudin, Computerworld
May 23, 2012 04:07 PM ET
Computerworld - In its third day of trading, Facebook's stock is still in a slump, taking the shine off the frenzy that led up to the company's initial public offering last week.
After closing just slightly above $34 a share on Monday, the company's stock fell to $31 per share, down 8.9%, at the end of trading Tuesday. The high for Tuesday was $33.59 a share.
Since the stock was first offered at $38 per share last Friday, the ensuing price dip has disappointed the market. Some financial analysts had predicted the stock price would quickly shoot to $50, $60 or even $90 a share.
"This is very bad for Facebook short-term, mid-term, and even long-term," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "In this new age, many people see stock-price and even IPO performance with determining how well the company is actually doing.... Facebook stock is absolutely, categorically struggling right now."
Zeus Kerravala, an analyst with ZK Research, said that despite the huge build-up in the months before Facebook's IPO, investors simply haven't been as excited about the stock, or the company's business, as anticipated.
"What a mess Facebook's IPO has been," he added. "The stock continues to fall and there's lots of finger pointing about why. And Facebook doesn't want to be the next Groupon, but they might be headed that way."
Groupon had a strong IPO and then the company saw its price slide in the following months. Just last Friday, Groupon's stock was down 6% from its opening share price.
In the last few weeks before Facebook's IPO, the company took several sharp hits.
Facebook co-founder and CEO Mark Zuckerberg was publicly chastised for wearing jeans and a hoodie sweatshirt to make a presentation to button-down Wall Street investors. His casual appearance left some wondering whether the 28-year-old had the maturity to run a major public company.
And as questions arose about the social network's ability to monetize its growing base of mobile users, General Motors pulled a major ad deal just before the IPO. The company went so far as to say Facebook's ads weren't working for it.
"Well, I think there are holes in the business and people see it," said Kerravala. "Facebook needs to prove to the market that they can be the company they say they can be. People won't buy promise."
However, Dan Olds, an analyst with The Gabriel Consulting Group, had a totally different take on Facebook's stock numbers. He contends that Zuckerberg played the stock market really well.
By setting the stock price slightly above what the market seems willing to pay right now, Facebook ensured that the maximum amount of money went to Facebook and its people who were selling the shares, not the investment bankers.
"All these people are complaining because there wasn't a big price pop on the first days of trading, but a big price pop means that the company selling the stock left money on the table," said Olds. "Facebook didn't directly sell the stock to investors. They sold it to the investment banks, who bought the whole lot of it and then they sold it to the market. So the investment banks are the ones taking it on this one."
END
Dirty business for sure, pity the poor small shareholders, they have a good case and I hope they win.....
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