No ‘Likes’ for Facebook as stock falls below $30
Facebook shares have fallen for the first time since they were traded publicly on May 18th. They are down by 26% to $28.19, which is a drop of $9.81 since the famous stock flotation.When trading began last month, Facebook shares were valued at $38 and raised $16 billion for the firm and its investors. This valued the company at $104 billion, but since the drop in its stock value this sum has been reduced to $79 billion. The public debut of the stock was an attempt to prove that the company is a sustainable business, not just a mere fad.
The fall in stock value is thought to be due to a number of different reasons and not a reflection on the actual value of the company. The debut was initially delayed by technical problems at the Nasdaq Stock Market and CEO Robert Greifeld, although he said that he was embarrassed about the situation, stated that it would not have contributed to the fall in stock prices.
One of the possible causes for this fall in prices relates to rumours which are circulating, which inferred that an analyst shared false information with a select group of investors regarding lower estimated Facebook revenue. There have also been fears over the limited amount of revenue being gained from advertising on the site. Wedbush analyst Michael Pachter has suggested that it was near-term issues such as an over-supply of stock and the Nasdaq technological glitches that damaged the Facebook stock. He has estimated a 12-month target price of $44.
The drop in share prices has resulted in Facebook CEO and founder Mark Zuckerberg falling from the list of top 40 richest people. He was estimated to be worth $19.4 billion on the day that the shares became public, but after the fall in prices this dropped to £14.7 billion. Some analysts have suggested that this dip is going to continue before the prices stabilise, but this has not discouraged some fund managers who are still considering buying if the prices dip lower. Investors will watch Facebook shares keenly as they search for companies which will provide much needed returns in a struggling economy.