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On the third day of trading for the newly public stock of Facebook, the trading continues to slide as investors in the company continue to reconsider how much the network is actually worth right now. The initial public offering of Facebook’s stock raised $16 billion, which put the value of the company at $104 billion, which is more than Amazon Inc., which is worth $98 billion. The stock fell $1.09, which is 3.2 percent, to $32.94 late on Tuesday morning after it dropped to $30.98 earlier in the morning Tuesday. This puts the value at $91 billion for the company. On the other hand, Google Inc. is worth close to $200 billion. Facebook still boasts 900 million users and the company is still operated by Mark Zuckerberg.
When Netscape released its IPO in 1995, the stock in the company doubled on the first day of trading. When Google released its IPO in 2004, the stock gained 18 percent when it debuted. Facebook’s IPO — like Netscape’s in 1995 and Google’s in 2004 — was billed as a milestone moment. On Monday, the stock for Facebook closed at $34.03, which was a decrease of 11 percent from the closing bell on Friday, which was $38.23. Last Thursday, the investment banks set the stock price for Facebook at $38. On Friday, the stock for Facebook opened at $42.05 and jumped from $45 and $38 throughout the day.
One reason why the Facebook stock could be struggling is the fact that its IPO went public during the same week that saw the market witness its worst performance of 2012 to date. As Facebook’s IPO went public, the interest in the stock market has decreased steadily since 2008, with $400 billion being removed from U.S. stock mutual funds. Another reason for the Facebook stock troubles is that of banks being extremely cautious. “Regulators want banks to take less risk,” said Larry Tabb. Tabb is the founder and CEO of Tabb Group. “To support a $100 billion offering can be challenging in this environment.”
“It was like trying to get a jumbo jet to take off in turbulent weather,” said Kathleen Shelton Smith. Smith is a principal at Renaissance Capital, which deals with IPOs. “It’s going to be a bumpy ride.”
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Many have been wondering how the stock for Facebook did not struggle more than it did the past couple of days. One of the answers is that the offering price never dropped below $38 even though it only climbed a couple of pennies above it. The reason for this is that the banks that set the price placed enough orders at $38 that would keep the price at that mark without dipping.
