Facebook loses half its value since IPO
Facebook’s stock has fallen to $US19 for the first time, meaning it has lost half its market value since the company’s initial public offering in May.
It hit that milestone on Friday, a day after the expiration of a lock-up period.
The end of the lock-up has provided some early investors and insiders with an opportunity to sell shares.
Investors have been concerned about Facebook’s ability to increase revenue and make money from its growing mobile audience. Many analysts, however, hold positive opinions of the company’s long-term prospects.
The stock closed on its first day barely above its initial public offering price of $US38. It has been below that level since. On Friday, the stock fell 87 cents, or 4 per cent, to $US19 in afternoon trading.
"Pressure will be back on the shares now that liquidity is back in the market," said Frank Davis, director of sales and trading at LEK Securities in New York. "If (the value of) your holdings has been cut in half, are you going to sit around and risk the rest of that?"
Facebook has been wildly volatile, moving more than 3 per cent in most sessions.
Analysts said it wasn't clear whether the selloff was actually driven by insiders or by other shareholders worried about potential insider selling.
Among the largest blocks of shares now available for trading are about 75 million shares owned by Russia's DST Global Limited and Mail.ru. Other potential sellers include venture capital firm Accel Partners and PayPal co-founder Peter Thiel.
"I don't think you're going to see all the supply come to market on Day One. People will wait until they think there will be a little bit of a price lift," said Evercore Partners analyst Ken Sena.
"You could say some of the concerns got priced in, and now it's a question how much demand is there to absorb the increased supply," he said.
Founded in a Harvard dorm room in 2004 by Chief Executive Mark Zuckerberg, Facebook has become the world's No. 1 Internet social network, challenging established Web giants such as Google Inc and Yahoo Inc for consumers' online time and for advertising dollars.
More shares coming
After staging one of the most highly anticipated IPOs in history and becoming the first U.S. tech company to debut with a market valuation of more than $US100 billion, Facebook has felt the sting of investor disenchantment.
Concerns about the company's slowing revenue growth, and its ability to make money on mobile advertising, have pressured the stock.
With Facebook's stock trading at $US20, Zuckerberg, 28, who controls a majority of the company's voting power, has now watched more than $US9 billion evaporate from his net worth.
"You've had a failed IPO, the stock has been cut in half, a sloppy quarter and a big lock-up expiring. Every one of those tends to erode faith," said Michael Binger, a portfolio manager at Gradient Investments, whose firm does not have a position in Facebook.
With Facebook still trading at 40 times its expected 2012 earnings - compared to 16 for Google and 14 for Apple Inc - Binger said he did not see a buying opportunity until the company's revenue growth starts to re-accelerate.
Another 243 million shares will be released from lock-up between mid-October and mid-November. On Nov. 14, more than 1.2 billion shares will be available for trading. Mark Zuckerberg will not be able to sell his shares until then.
"The biggest issue is not this lock-up; it's the November lock-up," said Pivotal Research Group analyst Brian Wieser.
If the company's perceived operating momentum doesn't improve by then, he said, "then there's real trouble ahead."