By Brian Womack and Amy Thomson - May 22, 2012 3:04 AM GMT+0700
Facebook Inc. (FB), the social networking site that raised $16 billion in an initial public offering, fell below its $38 offer price in its second trading day.
The shares dropped 11 percent to $34.03 at the close in New York. The stock rose less than a percent to $38.23 at the close of its first day of trading on May 18.
Sales at Facebook, which makes most of its money from graphically based online ads, came in at $3.71 billion last year. Photographer: Justin Sullivan/Getty Images
May 21 (Bloomberg) -- Darren Chervitz, research director for Jacob Funds, talks about Facebook Inc.'s stock price performance and the outlook for the social network firm. Facebook, the social networking site that raised $16 billion in an initial public offering, fell below its $38 offer price in its second trading day. Chervitz speaks with Trish Regan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
May 21 (Bloomberg) -- Bloomberg’s Jon Erlichman reports on the effect Facebook’s IPO is having on other technology companies. He speaks on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)
May 21 (Bloomberg) -- Tom Forte, an Internet analyst for Telsey Advisory Group, talks about the stock performance of Facebook Inc. in comparison to Google Inc. and LinkedIn Corp. Forte speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
May 18 (Bloomberg) -- Mark Zuckerberg, co-founder and chief executive officer of Facebook Inc., David Kirkpatrick, author of "The Facebook Effect," and Brian Wieser, an analyst at Pivotal Research Group LLC, offer their views on Facebook's trading debut and the outlook for the social-networking site. This report also contains comments from Robert McCooey, senior vice president of new listings and capital markets at Nasdaq OMX Group Inc.; Scott Rostan, chief executive officer of Training the Street; John Chachas, managing partner at Methuselah Capital Advisors LP, and Nick Thompson, a senior editor at New Yorker magazine and a Bloomberg contributing editor. (Source: Bloomberg)
Facebook, with more than 900 million users, is trying to attract more marketers to boost sales as competition increases. The company, the biggest provider of online display ads in the U.S., is set to lose the top spot to Google Inc. (GOOG) next year, according to EMarketer Inc. The offering valued Facebook at 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential. (EQR) Today’s slump reinforces concern that the IPO was priced too high.
“Investors are clearly recognizing the risks embedded in the stock,” said Brian Wieser, an analyst at Pivotal Research Group LLC, who has a sell rating on the stock and doesn’t own it. “It’s just been priced for perfection at the IPO price, and that’s clearly unrealistic.”
Morgan Stanley (MS), the bank that handled the IPO, stepped in to prop up the stock to keep shares from dipping below the offer price on May 18, said people with knowledge of the matter, who asked not to be identified because the purchases were private.
Shareholders ‘Want Out’
“It looks like they’re through spending their own money to support the price,” Francis Gaskins, president of researcher IPOdesktop.com in Marina del Rey, California, said in an interview today. “Shareholders are lined up at the gate --they want out.”
The IPO also suffered from trading glitches on its first day. Nasdaq OMX Group Inc. (NDAQ) Chief Executive Officer Robert Greifeld said a “poor design” in software driving auctions for IPOs caused issues with Facebook’s first trading day.
Morgan Stanley completed its role in the IPO auction at 11:11 a.m. on May 18, Greifeld said last week. Between then and 11:30 a.m., customers kept submitting cancellations and updating existing orders, putting Nasdaq’s systems into a “loop” and preventing it from opening the stock, he said.
The IPO valued the Menlo Park, California-based company site at $104 billion.
Mobile Users
Facebook is trying to adapt as more users visit its site through mobile phones instead of the Web. That put pressure on company executives to articulate their mobile strategy as they marketed the stock to potential investors ahead of the IPO. Facebook has said it would add mobile advertising along with new ads to reach users when they log off the company’s website.
Facebook still faces hurdles in traditional Web advertising. General Motors Co. (GM), the world’s biggest automaker by vehicles sold, said last week it was halting display ads on Facebook, while maintaining brand-promotion pages.
Sales at Facebook, which makes most of its money from graphically based online ads, came in at $3.71 billion last year. That puts it below the top 50 U.S. technology companies by revenue. Google Inc., valued at almost twice as much as Facebook, reported $37.9 billion in revenue last year. Google jumped 18 percent on its first day of trading in 2004.
Internet IPOs
Facebook was the 11th U.S. consumer Internet company to go public in the past year, a stretch that began with LinkedIn (LNKD) Corp. With a valuation of $104.8 billion at the May 18 close, Facebook is worth more than three times the other 10 combined. LinkedIn, a social network for professionals, is second, valued at $10.3 billion.
“There are only so many people that are going to buy into a hyper-growth story,” said Michael Pachter, an analyst with Wedbush Securities Inc. in Los Angeles, who rates the stock outperform and doesn’t own it.
LinkedIn surged 109 percent last May after its IPO. Groupon Inc. (GRPN), the biggest daily-deal coupon site, began trading on Nov. 4 at $20 and rose 31 percent that day. Groupon’s shares closed at $11.58 on May 18.
To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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