Facebook Loses Big Following IPO

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There were some who believed when the Facebook IPO was still only set to occur, it was a stock largely trading on hype. And given that the stock price dropped as far as 25 percent from its trading range on Friday, they were probably not far from wrong.

Facebook's IPO, according to NASDAQ officials, was fraught with problems almost from the start, leading them to announce plans to change procedures involved in launching the IPO. In fact, there were reports that the only reason Facebook managed to close around the $38-per-share price was because of support from underwriter Morgan Stanley, who stepped in to defend the share price.

Without Morgan Stanley's support today, shares of Facebook lost as much as a quarter of their value at one point.

Some brokers, like analyst Frank Lesh of FuturePath Trading LLC in Chicago, described the Facebook stock as "not living up to the hype," saying that some may have pulled out from the highs in a bid to buy on the dips, as the practice is sometimes called, and wait for the stock to hit a more reasonable level where it has room to grow.

Others, like Chief Derivatives Strategist JJ Kinahan of TD Ameritrade, described an overall unfavorable environment for the Facebook stock, with lots of negative media coverage and plenty of investors pulling out as a result.

Moreover, Brian Wieser at Pivotal Research Group, came out with a serious warning for Facebook, both buyers and sellers alike: "Investors are increasingly aware of the risk embedded in the stock price,” he said. “There are real concerns about growth and advertisers' frequent lack of certainty how best to use Facebook, along with rising costs and ongoing acquisition risk."

His target price for the stock was $30 – a far cry from the opening valuation of $38 or the intra-day high of $45.

While the Facebook stock launch captured the imaginations of some traders, who no doubt remembered Google's, Microsoft's or even Apple's IPO, other traders likely recalled the host of Web-based businesses whose IPOs ended up cratering.

It remains to be seen just how Facebook's stock will do in the long haul, though, and those who bought shares may very well go on to scorn all those who scoffed in the early going.




Edited by Braden Becker
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Contributing TechZone360 Writer

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