IPO Falling Flat on Its Face(book)

Some worthwhile analyses of why Facebook’s stock price has fallen below the float just a few days after the IPO:

  • Roger Chen, CNET, Why Facebook’s stock is tanking–“Facebook just isn’t worth $100 billion . . . At $38, Facebook’s price-to-earnings ratio was more than four times that of Google’s 2011 PE ratio. That’s despite Google posting revenue and profit that were 10 times higher than Facebook . . . Apple trades at about 10 times its estimated earnings for next year, while Google has a price-to-earnings ratio of 12. Based on BTIG’s estimate and Business Insider’s own estimate, Facebook has a multiple of 40 to 100 times earnings.”
  • MSNBC.com, After Facebook IPO debacle, finger-pointing begins
    • “Some pointed to underwriters offering too many shares, while others blamed an overly strong IPO price and worries about slowing revenue growth at the social network . . .
    • Initial trading on the Nasdaq was delayed for half an hour due to issues with some orders . . . ‘This is arguably the worst performance by an exchange on an IPO — ever,’ said Thomas M. Joyce, chairman and chief executive officer of trading firm Knight Capital Group. ‘The failure was Nasdaq’s’ . . .
    • [I]nvestment banks that arranged the offering overestimated the demand . . . ‘The late addition of 84 million shares to the offering overwhelmed demand, limiting the first day price’ . . .
  • Robert Hof, Forbes, The Facebook IPO Was a Dud-Here are 3 Reasons it Matters–“[N]o pop at all the first day, besides a measly 23-cent rise–which only happened because Facebook’s underwriters bought millions of shares to keep it from going underwater? And today, a 9% 11% plunge? Can anyone really believe that’s in the best interests of Facebook, its employees, and its investors? . . . IPOs have always been a publicity event, and part of that publicity is at least a reasonable pop in the stock price the first day. A rational mind might wish it weren’t so, since that means money the company didn’t get, but that’s the reality of IPOs . . . So the perception of a blown IPO, even if it wasn’t blown in the financial sense, matters . . .
  • It matters to Facebook employees . . . a flat to down stock price isn’t something that tends to keep the most ambitious people working long hours week after week.
  • Prospective employees may look twice at working at Facebook.
  • Valuations of other Internet companies just took a big hit.

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