Gov Brown, Call Your Office — Facebook Shares Plunging

Russ Steele

Governor Brown was expecting $2 billion in tax revenue from the Facebook IPO.   Facebook prices are falling below the IPO opening.

Update (05-21-12, 10:50) From the WSJ some more insight:

NEW YORK—Facebook Inc. FB -9.34% shares plunged on their second day on the stock market, a black eye for all those involved with the social networking company going public.

The shares fell 13.7% early Monday to well below the $38 price for the initial public offering, before pulling off the low.

“The underwriters completely screwed this up,” said Michael Pachter, analyst at Wedbush Securities. “This thing should have been half as big as it was, and it would have closed at $45.”

A spokesman for Morgan Stanley, the IPO’s lead underwriter, didn’t immediately respond to a request for comment.

Falling below the offer price so quickly is considered disappointing for a new stock, especially in the case of the most heavily traded IPO of all time. The reasons cited for the decline include an overly aggressive IPO price, the increased number of shares offered and concerns about Facebook’s slowing revenue growth.

While investor enthusiasm early on was high for Facebook shares and while bankers on the deal increased the stock price and number of shares ahead of the offering, many observers questioned the valuation of more than $100 billion that was placed on the social network, where revenue and earnings growth were already beginning to slow.

“Facebook’s IPO priced at a level well above where we foresaw compelling 12-month returns,” BTIG analyst Richard Greenfield said in a research note Monday. With revenue and earnings growth decelerating in 2012, “we find Facebook’s current valuation unappealing.”

The drop Monday has dealt Facebook Chairman and Chief Executive Mark Zuckerberg about $2.2 billion of paper losses, though his stake was still worth more than $17 billion Monday morning. The social network’s founder also retains almost 56% of Facebook’s voting power.

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About Russ Steele
Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.

2 Responses to Gov Brown, Call Your Office — Facebook Shares Plunging

  1. Dena says:

    When you get right down to it, Face book only offered two things, an idea and a customer base. I think both were way overpriced in this offering because in a few years, Face book will be history and everybody will move on to the next thing. How many people remember Bix, Compuserve or AOL. All have moved into history to be replaced by something else.

  2. sean2829 says:

    Dena,
    You are absolutely right about facebook but some of those companies you mentioned gave a lot of thrills during the joy ride. The key in any of these things is knowing when to bow out and honestly, I have no way to judge the whims of stock holders to determine that.

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