Facebook shares tank for the second time; regulators call for review

For the second day in a row, Facebook's share prices have plunged according to Reuters. The first day of trading went by with a unexciting flat price of $38 a share, then Monday brought a 11 percent plunge, followed by another 8 percent plunge down to just $31.28 a share.

In the days leading up to the opening day of trading, underwriters Morgan Stanley reportedly cut their revenue forecasts, information which may not have reached most investors before Mark Zuckerberg listed the company on Friday. Additionally, JPMorgan Chase and Goldman Sachs who are also underwriters cut their forecasts during the opening show. 

The Financial Industry Regulatory Authority (FINRA) said today that "the allegations, if true, are a matter of regulatory concern." Reuters pointed out that many still believe that Facebook stock is overvalued, though, stating that "Monday's closing price of $34.03 implied a 24 percent annual growth rate for Facebook earnings over the next 10 years -- a rate that would rank above 90 percent of the companies in that industry."

Despite the controversy, Nasdaq Chief Executive Bob Greifeld said today "while clearly we had mistakes in the Facebook listing, we still want to highlight the fact that it was the largest IPO ever and on Friday of last week, we processed over 570 million shares,"

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Of course it's going to tank. It isn't worth s**t except to the pickles who use it and they aren't going to give up any money to keep it going voluntarily!

Zuckerberg should've sold it the day it went public.

When Google+ sweeps Facebook off the carpet, those shares won't be worth the paper they are written on. Wait and see.

no tangible assets. no value. classic example of group mentality taken to the extreme. people are f-king stupid.

$15-$20 is what this stock will probably end up being. I suspect all the new millionaire employees wont be holding on to their stock and cash out as soon as they can.

texasghost said,
Wonder if Zuckerberg should have his marriage annulled now?

Has his valuation dropped too? Before the listing it was 17 Billion or a bit more.. maybe he was getting hints from Dotcom on how to do all this.

Basically the stock markets always trying to gamble with money. Everyone thinks they know what they are doing, and they still lose money sometimes, and sometimes a lot of money. Oh, well my money is safe.

Magallanes said,
A weeks ago, Neowin said the opposite

http://www.neowin.net/news/sor...ters-its-not-going-anywhere

So Facebook haters was right.

To me it makes little sense on the grand scheme, to invest in a free venture.. Just my views. Maybe a site which charged or made a minimum $$$ every quarter. Facebooks revenue is all based on their ads (or so we're told)
Their valuation is that everyone and their dog uses the service, so facebook knows everything about 800,000 *cough* people at any given time and can market directly to them. (provided everyone made a legit account, haha, and no privacy laws are busted, again, haha)

This is sure proof of how its doomed to fail. I wouldn't have a page on the site right now if my life depended on it. When you lose nearly 40BILLION or 18% of stock value in only 2 days of trading HELLO!!!?!? wake up people!! Those of you that have it - it is time to get off it while you can and reclaim the privacy you once had and to once again become social with the rest of the people around you.

sava700 said,
This is sure proof of how its doomed to fail. I wouldn't have a page on the site right now if my life depended on it. When you lose nearly 40BILLION or 18% of stock value in only 2 days of trading HELLO!!!?!? wake up people!! Those of you that have it - it is time to get off it while you can and reclaim the privacy you once had and to once again become social with the rest of the people around you.

That has nothing to do with what happens. This could have been a paperclip company. Don't be "ignunt!"

Damn... this piece of news is complicated to understand. Not being a native English speaker plus a lot of economic wording got me puzzled.

Could somebody explain in simpler words what the problem is?

I understand that the pricing or a share of Facebook went down two days in a row, but I didn't understand anything from the second paragraph.

From the third one I understand that people think that share price of Facebook is more than it should be? Or more than it really is?

Thank you very much anyway.

KaoDome said,
Damn... this piece of news is complicated to understand. Not being a native English speaker plus a lot of economic wording got me puzzled.
.

These 2 banks (the underwriters) are supposed to find the intrinsic value that they believe the company is worth and then determine the share price by dividing up all the pieces for sale.. Well these banks first off own the stock and have to buy it at a premium so cheaper then $38/share.. Well since they could not sell all the shares at that price they knew they were in big trouble because they actually lost money on the investment they made in facebook .. Hence lowering their expectations for the companies to make a profit..

I think the investigation stems from the fact that they knew they were going to lose money on the stock before it actually went up for sale but they could not do anything about it ..

KaoDome said,
Damn... this piece of news is complicated to understand. Not being a native English speaker plus a lot of economic wording got me puzzled.

Could somebody explain in simpler words what the problem is?

I understand that the pricing or a share of Facebook went down two days in a row, but I didn't understand anything from the second paragraph.

From the third one I understand that people think that share price of Facebook is more than it should be? Or more than it really is?

Thank you very much anyway.

Simplest answer: Banks tried to con public into believing FB is worth $100 billions. Public thinks banks are full of crap and aren't buying at the price banks want.

You cannot have underwriters revising their forecasts DURING the launch of an IPO - that's fraud / insider trading. However, that isn't entirely surprising considering that we're talking about Goldman Sachs and JPMorgan Chase.

theyarecomingforyou said,
You cannot have underwriters revising their forecasts DURING the launch of an IPO - that's fraud / insider trading. However, that isn't entirely surprising considering that we're talking about Goldman Sachs and JPMorgan Chase.

This whole thing reeks to me, even before Friday's opening.

theyarecomingforyou said,
You cannot have underwriters revising their forecasts DURING the launch of an IPO - that's fraud / insider trading. However, that isn't entirely surprising considering that we're talking about Goldman Sachs and JPMorgan Chase.

The question here is though, is this Facebook's fault, or the underwriting banks?

TCLN Ryster said,

The question here is though, is this Facebook's fault, or the underwriting banks?

underwriters.. thats there entire job to determine the value of the company.. and they messed up bad.. they were off by 15 billion dollars now which is pretty brutal.

TCLN Ryster said,

The question here is though, is this Facebook's fault, or the underwriting banks?

Facebook didn't do s--t but fall into the honeypot. The underwriters set the price. Markets dictate the price. If anyone's in hot water, it's the underwriters and possibly Nasdaq for not getting confirmations out until afternoon.

Deihmos said,
Meanwhile linkedin trades for over $100.

Yes, but how many shares were issued and what percentage of the company were offered in the IPO for LinkedIn? You can't just compare the share price alone.

Deihmos said,
Meanwhile linkedin trades for over $100.

please do me a favour and never invest in anything.. you obviously dont understand how it works.. hahaha.. you must think that microsoft being 30 dollars a share makes facebook better or something

Lachlan said,

please do me a favour and never invest in anything.. you obviously dont understand how it works.. hahaha.. you must think that microsoft being 30 dollars a share makes facebook better or something


Some people think that Google is worth more because it's stock is worth $600 vs Microsoft's $30... crazy people are crazy...

Value a company as high, for a high opening, sell a lot of shares before opening, make millions easy. And if want, when prices normalize, buy shares back for lower price

People make money, call for regulators.
People lose money, call for regulators.

People just don't get how investments work. I lost money, but me no bitch. Me keep working to capitalize new investments that may or may not provide returns. Roll the bones!

DClark said,
People make money, call for regulators.
People lose money, call for regulators.

People just don't get how investments work. I lost money, but me no bitch. Me keep working to capitalize new investments that may or may not provide returns. Roll the bones!

Indeed. It was widely accepted that people didn't think the shares were worth $38, yet millions of shares were bought anyway. It's the buyers own fault if they've now lost money.

DClark said,
People make money, call for regulators.
People lose money, call for regulators.

Its that the underwriters did a ****ty job with determining the value of this stock.. thats why its soo silly..

TCLN Ryster said,

Indeed. It was widely accepted that people didn't think the shares were worth $38, yet millions of shares were bought anyway. It's the buyers own fault if they've now lost money.

ah but you misunderstand... the early buyers weren't investors as such, just the underwriters trying to prop up a worthless stock.

DClark said,
People make money, call for regulators.
People lose money, call for regulators.

You guys seem to be missing the point - the regulators aren't investigating because people lost money. They are investigating insider trading. They claim that Morgan Stanley issued a revised revenue projection that was only shared with select clients.

TCLN Ryster said,

Indeed. It was widely accepted that people didn't think the shares were worth $38, yet millions of shares were bought anyway. It's the buyers own fault if they've now lost money.

There are several issues that will be investigated like the glitch at the beginning of trading, the role of Morgan Stanley etc. etc.
Things are not either black or white, a lot of grey in between.

I got a nice $25.45/share through a buddy inside GS, sold it the first thing I did Friday morning. ^ Zuckerberg's fortune actually dropped.

LAMj said,
I got a nice $25.45/share through a buddy inside GS, sold it the first thing I did Friday morning. ^ Zuckerberg's fortune actually dropped.

LMAO sure you did buddy...

LAMj said,
Zuckerberg's fortune actually dropped.

Well yes and no; it is lie being the owner of a gorgeous penthouse on Park Avenue, in New York. Theoretically you have, let's say, $10,000,000 because this is the value of the flat but until you sell it and cash the money........... you do not have it.

KillTheIrishman said,

Along with the investors.

Actually, I don't believe he did. Now I'm not exactly up with this deal, but I do believe that Zuckerburg sold a bunch of his shares before the big IPO on friday (early investors are allowed to or something?), which can only mean that he thought the $38 opening price was the best he was going to get - otherwise, why sell BEFORE opening if you expected the shares to go up?
On the other hand, Facebook as a company got $38 per share, it's everyone who bought those shares that missed out.

Kushan said,

Actually, I don't believe he did. Now I'm not exactly up with this deal, but I do believe that Zuckerburg sold a bunch of his shares before the big IPO on friday (early investors are allowed to or something?), which can only mean that he thought the $38 opening price was the best he was going to get - otherwise, why sell BEFORE opening if you expected the shares to go up?
On the other hand, Facebook as a company got $38 per share, it's everyone who bought those shares that missed out.

its called diversifying.. why would you hold 20 billion dollars in a single stock.. he probably got some of his cash out a invested in other companies that most intelligent people would doo..

Lachlan said,

its called diversifying.. why would you hold 20 billion dollars in a single stock.. he probably got some of his cash out a invested in other companies that most intelligent people would doo..

That's exactly what he did.

Facebook shares are set to plummet with this kind of negativity

david said,

Mr Zuckerburg did

Not so sure....... I mean now he grabbed a lot of hard cash that before it was not in his pocket.

Lachlan said,

its called diversifying.. why would you hold 20 billion dollars in a single stock.. he probably got some of his cash out a invested in other companies that most intelligent people would doo..

I get that you wouldn't keep all your shares in one basket, but the point is he sold these shares literally as soon as he could. If he expected them to go up, he'd have happily waited even a few hours. If you've got £10 and you want to buy stock in another company, would you buy £10 worth of stock or wait an hour and buy £15 worth of stock?

KillTheIrishman said,
Did anyone REALLY expect this to do well?

Only retail investors. "Oh, Facebook! It's popular, so it must be a good investment!" Investors that did their research established short positions and have a 25% return if they close their short position today.