Facebook stock down almost 11 percent in second day

Facebook is worth a bit less today than it was on Friday, the first day of its IPO launch. While the stock managed to stay slightly above its start price of $38 a share at the end of the day on Friday, CNBC.com reports that the company's second day of trading on Monday saw the price go down to $34.03 a share, nearly 11 percent lower than its price on Friday. It's also down 25 percent compared to the stock's highest price of $45 a share, achieved early in trading on Friday.

The kicker is that Facebook, even with its loss, was still the most heavily traded stock on the NASDAQ market Monday with nearly 168 million shares trading hands. Also, the overall NASDAQ market was up 2.46 percent today, its best day of 2012 so far.

Meanwhile, the NASDAQ stock market itself its getting slammed with criticism from stock traders who feel the market was not prepared to handle the massive amount of interest and activity surrounding Facebook's IPO launch. NASDAQ delayed the launch by 30 minutes before it allowed trading to begin and technical glitches continued throughout the day.

The Wall Street Journal reports that NASDAQ will pay up to $13 million to cover bad or faulty Facebook stock trades during Friday's time period. However, the real trading losses could be as much as $100 million for trades made by retail and institutional investors.

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However, the real trading losses could be as much as $100 million for trades made by retail and institutional investors.

Please don't forget that on Friday the share price was maintained, propped up by the underwriter buying enough stock so the share price didn't drop below the initial offer -- potential for a huge loss.

And the other sad news about this is...Facebook has decided not to issue actual paper stock certificates. You can only own facebook as electronic stock.

Which is sad for people that wanted to give the stock as a gift to someone from companies like OneShare and Giveashare. But the alternative these companies are offering is a kind of replica of what they believe the paper stock of facebook would look like and also give you an electronic ownership of facebook.

That's not that same as actually owning a paper stock that you can actually say to someone...it's worth something. Only the electronic share is valid...not the paper one.

texasghost said,
And the other sad news about this is...Facebook has decided not to issue actual paper stock certificates. You can only own facebook as electronic stock.

Which is sad for people that wanted to give the stock as a gift to someone from companies like OneShare and Giveashare. But the alternative these companies are offering is a kind of replica of what they believe the paper stock of facebook would look like and also give you an electronic ownership of facebook.

That's not that same as actually owning a paper stock that you can actually say to someone...it's worth something. Only the electronic share is valid...not the paper one.

Paper securities are a thing of the past, really. Facebook's just following the trend.

zhiVago said,

Paper securities are a thing of the past, really. Facebook's just following the trend.

I'm not talking about actual stock purchases. Re-read what I posted.

The stock prices seem to have only started off so high due to the media hype. Now stock brokers are seeing the actual potential...

This is a huge drop in price. The stock price does have a tendency for a correction following an IPO, but such correction shouldn't exceed 2-3%.

The company is overvalued.

Yes, 901 million users is impressive. A billion dollar revenue from the ads is remarkable too.

BUT, at nearly 100 billion market cap Facebook Inc. is valued more than some major oil and gas companies.

Stop and think for a second.

Oil and gas companies actually do something (extract, refine, produce) and they are at the most sweetest spot: they take something from the ground for free and covert it into cash. Plus they have all the infustructure - the factories, the pipelines, the tankers.

What does Facebook Inc. have besides a datacentre and 901 million users? Potential revenue? Until this potential is realized, stock price's correction will continue.

zhiVago said,

Oil and gas companies actually do something (extract, refine, produce) and they are at the most sweetest spot: they take something from the ground for free and covert it into cash. Plus they have all the infustructure - the factories, the pipelines, the tankers.

What does Facebook Inc. have besides a datacentre and 901 million users? Potential revenue? Until this potential is realized, stock price's correction will continue.

Yep, nothing other than potential revenue. Same goes for game companies that use FB for its users. No wonder the prices keeps falling.

I think it will level out eventually. Although with quite a lower price than now.

zhiVago said,
This is a huge drop in price. The stock price does have a tendency for a correction following an IPO, but such correction shouldn't exceed 2-3%.

The company is overvalued.

Yes, 901 million users is impressive. A billion dollar revenue from the ads is remarkable too.

BUT, at nearly 100 billion market cap Facebook Inc. is valued more than some major oil and gas companies.

Stop and think for a second.

Oil and gas companies actually do something (extract, refine, produce) and they are at the most sweetest spot: they take something from the ground for free and covert it into cash. Plus they have all the infustructure - the factories, the pipelines, the tankers.

What does Facebook Inc. have besides a datacentre and 901 million users? Potential revenue? Until this potential is realized, stock price's correction will continue.

And what did *Google* have when it went public? Far less than Facebook, believe it or not. Also, while those same oil companies have far better revenue than Facebook (admitted), they aren't exactly darlings outside of Wall Street, are they? Part of the reason that hedge funds are making such large bets against Facebook (and any stock that relies on advertising for most of their revenue - newspaper stocks and broadcasters, such as CBS Worldwide, are also taking it in the neck) is that the prevalent thinking among the hedge funds is a double-dip, if not triple-dip, recession - at the very least in Europe. Facebook is actually among the more solid of Internet stocks (it's a lot better grounded than Zynga, which also took it in the neck); the problem is that hedge-fund managers are betting on a return to recession (and therefore a continued flight to safety - which also explains the rather paradoxical interest in US Treasuries by EU-based hedge funds).

PGHammer said,

Facebook is actually among the more solid of Internet stocks (it's a lot better grounded than Zynga, which also took it in the neck);

I am sorry but nowadays I would not get even close to any stock with a P/E around 100.............

PGHammer said,

And what did *Google* have when it went public?

A service that everyone on the Internet needed (search) and far more R&D in a variety of areas.

It didn't slip 11% on the first day either.

Facebook is actually among the more solid of Internet stocks

Go ahead and invest. It's your money!

the problem is that hedge-fund managers are betting on a return to recession

You know Apple rose 5.8% yesterday pulling the index with it by 2%...I guess your hedge fund managers think Apple is immune to it.

Edited by zhiVago, May 22 2012, 10:04am :

zhiVago said,
This is a huge drop in price. The stock price does have a tendency for a correction following an IPO, but such correction shouldn't exceed 2-3%.

The company is overvalued.

Yes, 901 million users is impressive. A billion dollar revenue from the ads is remarkable too.

BUT, at nearly 100 billion market cap Facebook Inc. is valued more than some major oil and gas companies.

Stop and think for a second.

Oil and gas companies actually do something (extract, refine, produce) and they are at the most sweetest spot: they take something from the ground for free and covert it into cash. Plus they have all the infustructure - the factories, the pipelines, the tankers.

What does Facebook Inc. have besides a datacentre and 901 million users? Potential revenue? Until this potential is realized, stock price's correction will continue.

Plus I strongly suspect the 900 million users is grossly inflated. The pop of the planet is 7000 million, and when you consider that many people are:

* Too poor (i.e. Africa and rural India / China)
* Too old / young ( how many babies or 80 year olds use fb? Some but not many)
* Use a different service (many countries people commonly use alternatives to fb)
* Simply don't have an account (or like me have one they don't use)

I think one day investors will see through the myth.

Martin5000 said,

Plus I strongly suspect the 900 million users is grossly inflated. The pop of the planet is 7000 million, and when you consider that many people are:

* Too poor (i.e. Africa and rural India / China)
* Too old / young ( how many babies or 80 year olds use fb? Some but not many)
* Use a different service (many countries people commonly use alternatives to fb)
* Simply don't have an account (or like me have one they don't use)

I think one day investors will see through the myth.

Well, you don't have to go as far as the total planet's population coz, supposedly, there are only like 1.5 billion with the Internet access. So even if Facebook's got something like 700 million active users, that's still half of all the people connected.

Nevertheless, as you rightfully put, they are the users, not the customers.

at least the investors of Farcebook have the compensation to whinge about it to all their "friends" and update their financial status in a negative direction :rotf:

Further, note that the rise Friday (and today's fall) were a mirror of what the rest of the market did - both days, the heavy activity was fueled by hedge funds. The public comments (on CNBC, Bloomberg Television, and elsewhere) from these hedge-fund managers all show a disdain for *Internet* stocks, and a sudden change in their equity mix; away from BRIC/emerging markets, the EuroZone, and even China, and in favor of American *manufacturing* stocks. The only reason why Google is in the favored list is due to Motorola Mobility. Ever think that theses same hedge funds - now that the pressure and the scrutiny is no longer on them - might decide to throw their weight around? (Note that any company that relies heavily on advertisitng - not just Facebook, but newspaper-company stocks, also is taking it in the neck.)

Chica Ami said,
Hmm if they drop 11% a day, they will be kicked out of the stock market within 9-10 days.

That's not how percentages work.

None of the numbers make sense...right now. If they announce ANYTHING that shows they can make money on mobile, we'll all wish we had some stock.

Hahaiah said,
None of the numbers make sense...right now. If they announce ANYTHING that shows they can make money on mobile, we'll all wish we had some stock.

Except for the fact that zombies hate ads... they only crave for status updates.
You also forgot that it has to be PROFITABLE. Besides that, the share price will be so low that it won't even reach the IPO price for the coming YEARS.

Luis Mazza said,

Except for the fact that zombies hate ads... they only crave for status updates.
You also forgot that it has to be PROFITABLE. Besides that, the share price will be so low that it won't even reach the IPO price for the coming YEARS.


Facebook has been extremely profitable since the year after it introduced its ad system (2009). It had a billion dollar profit last year and that's expected to go up substantially this year. I disagree with your theory; I suspect we'll see a modest increase in its stock -- to around its trading high at IPO, $45 -- within a year. You won't see a big valuation increase until it finds a better way to integrate its ads.

Anthony Tosie said,

Facebook has been extremely profitable since the year after it introduced its ad system (2009). It had a billion dollar profit last year and that's expected to go up substantially this year. I disagree with your theory; I suspect we'll see a modest increase in its stock -- to around its trading high at IPO, $45 -- within a year. You won't see a big valuation increase until it finds a better way to integrate its ads.

Stock valuation is complicated, but an easier and somewhat fine approach is multiplicating the profit for five years. Even extrapolating to 10 billions a year (it is 1 billion now), actual stock prices can still go down another 50%.
So, the only thing left for you and your belief is... praying.

Luis Mazza said,

Stock valuation is complicated, but an easier and somewhat fine approach is multiplicating the profit for five years. Even extrapolating to 10 billions a year (it is 1 billion now), actual stock prices can still go down another 50%.
So, the only thing left for you and your belief is... praying.


You may want to re-read the financial history section of my editorial from the weekend:
http://www.neowin.net/news/sor...ters-its-not-going-anywhere

Comparing the P/E of an IPO company to an established company makes little sense. Google had a similar P/E when its stock launched, and I don't think "praying" is what got it where it is today. If you read most of the predictions from analysts, you'll see they expect Facebook to be above $40 within a year. I don't think their calculations involve "praying," either.

Edited by Anthony Tosie, May 22 2012, 5:16am :

Anthony Tosie said,

Facebook has been extremely profitable since the year after it introduced its ad system (2009). It had a billion dollar profit last year and that's expected to go up substantially this year. I disagree with your theory; I suspect we'll see a modest increase in its stock -- to around its trading high at IPO, $45 -- within a year. You won't see a big valuation increase until it finds a better way to integrate its ads.

Check FB PE rate............ This are not the late '90s...............

Anthony Tosie said,

If you read most of the predictions from analysts, you'll see they expect Facebook to be above $40 within a year.

6% gain in one year is not very reassuring; besides many analysts do not share your rosy predictions:

http://tech.fortune.cnn.com/20...tech-bubble/?iid=SF_F_River

http://online.wsj.com/article/...SJEurope_hpp_LEFTTopStories

Finally let me clarify you that people like me, the "FB haters" as you tried to label critics of the IPO, are, in the vast majority at least, not haters of FB but simply agnostic people who buy and sell stocks after completing their homework.

Anthony Tosie said,

You may want to re-read the financial history section of my editorial from the weekend:
http://www.neowin.net/news/sor...ters-its-not-going-anywhere

Comparing the P/E of an IPO company to an established company makes little sense. Google had a similar P/E when its stock launched, and I don't think "praying" is what got it where it is today. If you read most of the predictions from analysts, you'll see they expect Facebook to be above $40 within a year. I don't think their calculations involve "praying," either.

Google is unique. Ads are pushed as you search and Facebook pushes garbage while you're zombifed. You're going to lose a lot of money.
Lessons were learned since 2000. Do your homework.

Fritzly said,

6% gain in one year is not very reassuring; besides many analysts do not share your rosy predictions:

http://tech.fortune.cnn.com/20...tech-bubble/?iid=SF_F_River

http://online.wsj.com/article/...SJEurope_hpp_LEFTTopStories

Finally let me clarify you that people like me, the "FB haters" as you tried to label critics of the IPO, are, in the vast majority at least, not haters of FB but simply agnostic people who buy and sell stocks after completing their homework.


If you did your homework, I don't think you'd have the insanely pessimistic stance you have. I've seen your overwhelmingly negative responses in almost all Facebook articles, so I challenge your assertion that you're agnostic in regards to the platform.

@ Luis: I've done my homework. Google's learned lessons since it launched; do you not think Facebook will? Because that doesn't make any sense. To repeat what I said: I already stated in my editorial that Facebook needs more integrated advertisements. I've even commented in multiple articles that Google's advertising system is better at the moment. So I think you're misunderstanding me.

Anthony Tosie said,

If you did your homework, I don't think you'd have the insanely pessimistic stance you have. I've seen your overwhelmingly negative responses in almost all Facebook articles, so I challenge your assertion that you're agnostic in regards to the platform.

@ Luis: I've done my homework. Google's learned lessons since it launched; do you not think Facebook will? Because that doesn't make any sense. To repeat what I said: I already stated in my editorial that Facebook needs more integrated advertisements. I've even commented in multiple articles that Google's advertising system is better at the moment. So I think you're misunderstanding me.

Well, it is a high risk investment that may take a long time to prove itself. I hope you are lucky. You're nice.

Anthony Tosie said,

If you did your homework, I don't think you'd have the insanely pessimistic stance you have. I've seen your overwhelmingly negative responses in almost all Facebook articles, so I challenge your assertion that you're agnostic in regards to the platform.

You are free to challenge the fact I am agnostic but the price has goes down so I am right and you are not.............. simple as that.
When, in my opinion, the value of FB shares will reach a certain price I might buy it and hopefully make a profit out of the operation...................................

Fritzly said,

You are free to challenge the fact I am agnostic but the price has goes down so I am right and you are not.............. simple as that.
When, in my opinion, the value of FB shares will reach a certain price I might buy it and hopefully make a profit out of the operation...................................


I never made an "I'm right, you're wrong" kind of statement that can be assessed at this point in time, so I'm really not sure what you're referring to. And right now you're making statements akin to a sports fan gloating for being up after only two minutes played in a game.

@ Luis: I didn't invest. It's like playing Russian Roulette the first week or two of an IPO. Wait for a price to settle, then buy if you're bullish on a recently public company.

Anthony Tosie said,

I never made an "I'm right, you're wrong" kind of statement that can be assessed at this point in time, so I'm really not sure what you're referring to. And right now you're making statements akin to a sports fan gloating for being up after only two minutes played in a game.

Not at all, on the contrary you were the one who attempted to label people who doubted about the validity of the investment as "FB haters"............
As Cicero stated 2000 years ago: "Pecunia not olet" meaning money does not smell.
I keep buying and accumulating MS shares because, IMO of course, there is a real, tangible value there ad as soon as Mr. Ballmer will go the stock will soar............
I did not see any opportunity in buying FB at $38 and I expressed my opinion without attempting to label people with a different opinion as "FB worshippers" or anything like that.
I am not infallible; I missed to buy Yahoo when it went public and I bought, loosing money on it, UPS when it did it; I took the losses and moved on. Passion is a feeling I reserved for other situations........

Fritzly said,

Not at all, on the contrary you were the one who attempted to label people who doubted about the validity of the investment as "FB haters"............
As Cicero stated 2000 years ago: "Pecunia not olet" meaning money does not smell.
I keep buying and accumulating MS shares because, IMO of course, there is a real, tangible value there ad as soon as Mr. Ballmer will go the stock will soar............
I did not see any opportunity in buying FB at $38 and I expressed my opinion without attempting to label people with a different opinion as "FB worshippers" or anything like that.
I am not infallible; I missed to buy Yahoo when it went public and I bought, loosing money on it, UPS when it did it; I took the losses and moved on. Passion is a feeling I reserved for other situations........


That isn't even remotely what my article was about. "Facebook haters" was a reference to people who hate Facebook; it wasn't an attack on anyone, nor did I label anyone something negative -- it was merely a description for people who hate Facebook.

Luis Mazza said,
Expect more in the coming days.

this, that 38USD was only because the banks kept it high. without this support, the shares would've collapsed already/