Facebook is taking a bumpy ride with the stock diving up to 13% overnight as investors dump their Facebook shares.The company’s founder Mark Zuckerberg, who married his long-term girlfriend over the weekend, saw the value of his fortune drop by more than $2bn to just under $17bn while $10 billion was wiped off Facebooks value.
The much vaunted $104bn float – the largest ever by a US technology company – is rapidly turning into a major embarrassment for the social networking site and Wall Street along with the millions of social network fans.
The big problem for investors is the lack of revenue streams with some analysts tipping that Facebook has already peaked and that it will face tough competition from new social network sites in the future.
The shares, which managed to stay a fraction above $38 on their Friday debut with the help of Morgan Stanley, dropped like a stone when the New York Stock Exchange opened last night.
Facebook slumped as much as 13pc over the first hour of trading in New York, as shareholders scrambled to sell shares in what had been pitched as the greatest growth story of the decade.
“The market is now collectively reflecting the real risks around Facebook,” said Brian Wieser, an analyst at Pivotal Research Group, which has a “sell” rating on the company. “The danger for Facebook, is that when you price it very high, the risks to that price now become the overarching narrative for the company.”
Other Analysts said Facebook’s troubled start to life as a public company only intensifies the pressure on Mr Zuckerberg and his management team to justify a valuation that makes it one of the S&P 500’s most expensive companies. Based on current earnings, only Amazon and Equity Residential are more expensive to buy, according to Bloomberg.
“The valuation is all about future expectations,” said Andrew Caldwell, a valuations partner at BDO in London. “There’s no basis for it in current performance.”