Facebook loses friends as stock drops further
FACEBOOK shares tumbled again yesterday on the third day of trading as more investors turned their backs on the website’s inflated price.
Falling 4.3 per cent in pre-market trading, the stock slid further in the day to close down 8.9 per cent at $31.
The social networking giant has now shed $19bn from its initial $104bn market cap since floating on Friday.
Facebook’s bankers, who stepped in on Friday to keep the share price above $38, now have even more to explain after the shares closed under the hiked IPO price range.
US regulators the SEC and FINRA added pressure to the banks and the Nasdaq stock exchange last night, saying that the issues around the IPO should be reviewed.
“I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook,” said SEC chairman Mary Schapiro.
Nasdaq had come under fire after a glitch delayed trading in Facebook shares for 30 minutes on Friday.
Meanwhile Morgan Stanley, the lead adviser in the offering, said it had acted “in compliance with all applicable regulations” after it emerged the bank had cut its revenue forecasts for Facebook in the middle of its IPO roadshow.
JP Morgan and Goldman Sachs, also main underwriters on the deal, were said to have done the same.
“There is still scepticism over what Facebook’s underlying value is. Pricing the stock is a delicate line – it was pitched at the very top and there’s no where else to go from there,” BDO’s head of valuations Andrew Caldwell told City A.M.