On their second day as a public stock quoted on the Nasdaq, Facebook’s share price lost close to 11% of its value – falling below its list price. The stock market doesn’t appear to be friendly to the social network at this time.
Facebook’s stock market debut has been interesting, with the world’s largest social network having difficulty finding friends on the Nasdaq. Having more than 900 million users doesn’t appear to be enough alone to entice investors, even though it is still too early to draw any real conclusions.
Facebook signalled their stock market launch last Friday with a list price of 38 dollars a share, with 421 shares being listed on the market. The IPO raised 16 billion dollars and valued the group at 104 billion dollars.
It could be that this introduction is slightly excessive. On Friday, Facebook’s shares closed at 38.23 dollars thanks to investment bank Morgan Stanley’s assistance. On Monday, the company’s second day on the market, Facebook’s share price opened at 36.66 dollars before finally closing at 34.03 dollars.
Facebook’s share price therefore lost more than 4 dollars (or 10.99%), falling below the list price. This is concerning in the sense that other Nasdaq technology companies jumped on the day, like Yahoo! following the announcement that they had reached an agreement with Alibaba. It can be noted that LinkedIn’s share price did retreat on the day though.
This difficult beginning for Facebook demonstrates the uncertainty around social networks – or at least their exaggerated values. By withdrawing their support as an advertiser due to insufficient returns, General Motors decision could be viewed as a king of alarm.
Online advertising is Facebook’s main source of revenue – something which is rather sensitive to markets. The social network is also betting on virtual goods, with profit from this field expected around 2016. To diversify, Facebook has also launched an experiment in New Zealand with users being able to pay to highlight their status updates.
But Facebook also has other problems to overcome linked to privacy concerns. In the United States, a group is threatening the company with a 15 billion lawsuit for privacy violation.