As Facebook plunges from dizzy heights – prompting many to wonder…why?
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The Social Network share price has dipped more than 18% since it went public last Friday morning, to $31.12, with Tuesday trading on the Nasdaq marking the second day in a row the price has tumbled from an opening price of $38.
Shares fell Monday to $31 – down 11% and ended the day yesterday 8.9% lower.
This came after The Social Network raised the asking price for shares from initial asking price from $$28-$35 to $34-$38 and lifted the numbers of shares to be sold by 25% to 421.2 m, in the weeks leading up to the hotly anticipated IPO, a decision said to be driven by Chief Financial Officer David Ebersman.
On Friday when Facebook went public, in one of the most anticipated technology pops in history, stock climbed just 0.6%, but only after bankers sought to prop up shares in the face of appearing like another Groupon or LinkedIn IPO flop.
Mark Zuckerberg’s social network, which has more than 901m members, earned $16bn in Day One of share trading.
Read: Facebook Starts Spending Investors Cash After Flaky IPO
However, Facebook investors are less than happy.
But it seems Facebook advised analysts to reduce their revenue and profit forecasts in the day leading up to the IPO, to avoid over hyped expectation for the company that made $201m profit in its latest financials.
“Facebook backed off and said, ‘Hey get your models down,” a source from an underwriting company told Reuters.
This warning was made on May 9, the same day Facebook amended its prospectus that cautioned possible future lower advertising revenue.
Lead underwriting Morgan Stanley insist they did nothing wrong and say it was in fact them, who advised Zuckerberg’s team to cool the revenue forecast figures. And Goldman Scashs are singing the same tune.
“Rather than anything illegal or untoward, the valuation was the truly unfathomable part of what’s causing this frenzy,” said Michael Holland, chairman of New York-based investers Holland & Co, told Bloomberg.
This comes as Nasdaq bungled Facebook’s first day of trading – one of the biggest ever – which led to confusion for investors over whether they had bought or sold stock.
The bungle is said to be investigated by U.S. Securities and Exchange Commission, according to reports.