Facebook shares drop 43% below IPO price

3:48 PM, Jul 31, 2012   |    comments
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By Matt Krantz, USA TODAY

Facebook's rocky relationship with investors hit a new low Tuesday as shares tumbled another 6% to $21.71 a share. Three trading sessions after the social networking giant reported earnings for the first time as a public company, concerns about growth and share valuation are far from over.

During Tuesday's trading session, Facebook shares touched $21.61 - setting a new low water mark less than two months after the company's ballyhooed initial public offering. The shares are now 43% below the $38 a share IPO price on May 18.

While the company's results last week roughly matched Wall Street expectations, investors had hoped to see more progress in terms of user growth and in how the company is capitalizing on the rapid rise of mobile usage. Investors wanted Facebook (FB) to "show confidence they could grow the company, and they didn't," says Francis Gaskins of IPODesktop.com.

The worst may be yet to come. On Aug. 16, 91 days after the IPO, insiders, such as company officers, directors and employees, can sell 268 million shares of stock. Between 91 and 181 days after the IPO, insiders can sell an additional 137 million shares. Given the stock's plunge so far, investors are braced for an avalanche of available shares from insider sales, putting more downward pressure on the stock price.

It's a stunning reversal of fortune in a short period of time. Facebook is now the third-worst performer of all IPOs in the U.S. so far this year, says IPOScoop.com. Around the time of the IPO, individual and institutional investors alike were clamoring for shares of the multibillion-dollar IPO. Facebook shares' precipitous 43% price drop is marginally ahead of U.S. Silica, down 44%, and Renewable Energy Group, down 48%.

The fallout from Facebook's dismal performance isn't confined to the billions of dollars erased from CEO Mark Zuckerberg's personal fortune. Analysts attributed at least part of Tuesday's selloff to the announcement of Facebook-related losses by a large Swiss bank. UBS Tuesday reported a disappointing 58% decline in quarterly profits, in part, to losses from its handling of Facebook stock at the IPO launch. The bank says it lost money due to technical problems handling orders of Facebook stock for clients.

"Facebook doesn't have any friends on Wall Street or Silicon Valley," says Gaskins. "That's a problem. Their brand has been damaged a lot."


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