Facebook Stock Fails Horribly
According to Bloomberg (that super important financial data firm) Facebook's IPO (Initial Public Offering) was the worst flop of the decade. And that is saying something, because a lot of other companies in similar flops are now bankrupt. In the first 5 days of trading, Facebook's stock has gone down 13%! Today (5/25/12) it is down by 16% from the IPO.
Update: 5/29/12: stock is at 28.84 dollars and falling, down 24.57% now...
The First Day
They say all stories should start at the beginning. Unfortunately this story is scattered all over a timeline, and more parts are unfolding as more people come out with information. So, we will start at the first day of trading, even though this is not the true beginning of stock woes.
Facebook decided to post their stock on NASDAQ. NASDAQ on that fateful day started to have a few problems with their computers. However, instead of waiting for Facebook's stock release, they did not. This lead to a lot of people buying Facebook stock but not knowing if they had purchased it or not, causing a general confusion and a lot of anger in most departments.
However, could this have caused Facebook's stock to drop so much? I don't really buy it. Let's look at a few other items on the timeline.
It seems that before Facebook went public an investment firm called Capital research and Management told Facebook that it wanted to invest heavily in the company. One of Facebook's underwriters was nice enough to warn Capital Research about declining revenue forecasts which led the firm to not buy as many shares as it would have. Furthermore a manager at the firm told a banker at Morgan Stanley that the $38 IPO price was "ridiculous" based on the firm's information.
Currently there is a lawsuit against Facebook and a bunch of banks about failing to disclose "a sever and pronounced reduction" in revenue growth forecasts. This is specifically infuriating to those who bought at 40-45 a share when it is now $31.91 (1PM PST 5/25/12) and is only projecting a downward fall.
This stock has an overall projection of falling. I doubt that it will recover back to where it was. Scandal is ensuing where insider trading is concerned, lawsuits, and the logical reevaluation of how much Facebook is really worth, rather than some pumped up number that Facebook is saying.
Also, looking at the current Facebook news we find some interesting tidbits. The new Camera App from Facebook for phones has many feeling uneasy as it takes an authoritarian tone in requiring iOS Location Services to be turned on so it can access your locally stored photos - which would let know where you are at all times. Another interesting rumor is that Facebook is talking with Opera browser and trying to buy it - perhaps trying to get more information from users in an easier way than its cookie tracking (see below article, Facebook The Sellout).
The following articles both outline why people are becoming unhappy with Facebook and their shady dealings, as well as why investing in Facebook would be a mistake, other than the general downfall of the stock currently.
For More Reading On Facebook
Facebook The Sellout: Can We Trust Facebook Anymore?
Why Investing in Facebook is a Mistake