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As predicted, the banks could only prop up Facebook's stock price for so long. It was obvious greedy investors overvalued Facebook's share price and overall valuation. Banks could only prop up the stock for one day, pouring $11B into trying to keep its price up on Friday, the day of the IPO offering.

Now they have to let the invisible hand take over - and it's squashing FB.

NEW YORK (Dow Jones)--Facebook Inc. (FB) shares fell below its initial public offering price of $38 Monday, on just its second day of trading, a black eye for all those involved with the social networking company going public.

Facebook shares recently traded at $36.46, down 4.6%. A move below $36.50 takes Facebook's overall valuation under $100 billion.

The premarket decline in Facebook shares sets the stage for the stock to close below the $38 level that shares were priced late Thursday. It is usually considered disappointing for a new stock to fall below its offer price so quickly, especially in the case of the most heavily traded IPO of all time.

While investor enthusiasm was high for Facebook shares, leading bankers on the deal to increase the stock price and number of shares ahead of the offering, many observers questioned the more than $100 billion valuation being placed on the social network, where revenue and earnings growth were already beginning to slow.

"Facebook's IPO priced at a level well-above where we foresaw compelling 12-month returns,"
BTIG analyst Richard Greenfield said in a research note Monday. With revenue and earnings growth decelerating in 2012, "we find Facebook's current valuation unappealing."

On Friday, Facebook's shares repeatedly tested the $38 level, but lead underwriter Morgan Stanley (MS) reportedly moved to prop up Facebook's stock Friday. Dave Lutz, managing director at Stifel Nicolaus, said Facebook's underwriters might stop supporting the stock's price to thwart short-term traders counting on the underwriters buying at $38.

"We think this could just be a technique of Morgan Stanley trying to shake out some of the weaker hands," Lutz said. "What a lot of people will do [when the underwriters continue to step in] is say, 'If the underwriter's not going to let it break through, I'll just sit there and day trade right in front of it.'"

"In theory, [letting the price fall below $38] is a smart idea as long as there's not broader institutional selling," Lutz said. "Where Facebook closes today is going to be very important."

"The underwriters completely screwed this up," said Michael Pachter, analyst at Wedbush Securities. "This thing should have been half as big as it was, and it would have closed at $45.

The saving grace may be that Eduardo Saverin has to pay exit fee (skipping out on US citizenship) on the overvalued stock price.
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Comment Preferences

  •  Facebook is proof there is no hope for humanity. (9+ / 0-)

    Facebook has never made money. They don't even break even in sales. They are planing to monetize it by selling media on it only if they do that and put themselves in competition with Apple and Google, their app will most likely stop working on those devices. MS might not have a problem with that but who uses the Windows phone? They can't give away the Nokia Lumia 900 and it's probably one of the best handsets hardware wise in a long time. If they can't monetize it correctly (and so far nobody thinks they will be able to with a .04 click through rate) they will be forced to sell your info and pictures. Delete your accounts not, peoples. Save yourself the problems that are, at this point, looking pretty inevitable.

    Lo que separa la civilizacion de la anarquia son solo siete comidas.

    by psilocynic on Mon May 21, 2012 at 01:13:53 PM PDT

    •  Amazon... (2+ / 0-)
      Recommended by:
      eXtina, psilocynic

      sold a bunch of Kindle Fires and they sell all of the media used on the tablets.

      Facebook can deliver content right to people's computers and it is from a site people already use a lot.

      Facebook can partner up with Verizon to deliver content to all of their phones over Verizon's 4g network.

      There are a bunch of options for Facebook. Hell, if Mark Z really wants to be bold he takes some cash and sets up his own tablet making operation, buys Netflix, and goes into the content delivery business.  

      Amazon should be what Mark Z looks to for an example of what works. Who has more market cap Amazon or Facebook, One should buy the other and take over the world.

      As a nation, the U.S. consumes the most hot dogs per capita. So you'd be wise to never underestimate our powers of denial.

      by jbou on Mon May 21, 2012 at 01:44:25 PM PDT

      [ Parent ]

      •  that would suck, however (6+ / 0-)

        if i had to join facebook in order to watch movies on netflix.

        hope springs eternal and DAMN is she getting tired!

        by alguien on Mon May 21, 2012 at 02:07:51 PM PDT

        [ Parent ]

      •  I don't think the fire is as good an example as (3+ / 0-)
        Recommended by:
        eXtina, Deward Hastings, G2geek

        you might think it is. Couple of reason other than the huge drop in sales the fire experienced after it's initial "holyshit, a 200 dollar tablet!" excitement are; Amazon's cutomers/members are going there to spend money whereas facebook users are not and facebook is at a sever disadvantage data center wise. They have a hard enough time keeping up with the stupid pictures users are constantly uploading to there site. The instagram purchase and resulting data center integration is going to be a clusterfuck as well. Facebook stock is down 11% after it's second day of trading and I don't think that trend is going to reverse itself. Investors will be demanding that it start making money soon. The easiest way to do that is to bundle its data (your info) and sell it to third party companies for marketing and that's when you'll see a mass migration away from facebook just like we saw with myspace. And if you remember, myspace was also never going away after becoming the new, best way of communicating and sharing with friends. Myspace, facebook, google+; these things are all fads and will come and go. When this much money gets dumped into something so fleeting only bad things will ensue.

        Lo que separa la civilizacion de la anarquia son solo siete comidas.

        by psilocynic on Mon May 21, 2012 at 02:10:09 PM PDT

        [ Parent ]

        •  they can sell what they have on me... (3+ / 0-)
          Recommended by:
          eXtina, psilocynic, G2geek

          but I knew better when I signed up and I only used my first name and last initial and I have not used the site to log into any other sites or have I liked any products or services outside of two of my old friend's businesses. I don't use their apps, or games or anything. I am not a good facebook user. i basically use Facebook as a way to connect with some old friends and some family and I score the occasional date with someone who I didn't know had a thing for me in the past.

          Facebook is going to have to resolve the server issues and look to start selling products to the people who use the site.

          As a nation, the U.S. consumes the most hot dogs per capita. So you'd be wise to never underestimate our powers of denial.

          by jbou on Mon May 21, 2012 at 02:16:32 PM PDT

          [ Parent ]

      •  what I don't understand is.... (3+ / 0-)
        Recommended by:
        psilocynic, wilderness voice, eXtina

        .... how anyone could prefer to watch television, much less a full-length movie, on a 4" diagonal screen they have to hold in their hand or prop up on a stand.  

        You have to go back to the 1930s to find televisions where 4" screens were standard.  

        By the post WW2 era they're growing to 7" and larger:

        And the very first color TVs were typically 12":

        1925 audio and 1935 video, in a package just the right size to replace the formerly-omnipresent pack of cigarettes in the shirt pocket.  

        Oh, I figured it out!: these things are for helping people quit smoking!  Instead of "Reach for a Lucky instead of a sweet!", it's all about "Reach for a Smartphone instead of a smoke!"


        "Minus two votes for the Democrat" equals "plus one vote for the Republican." Arithmetic doesn't care about your feelings.

        by G2geek on Mon May 21, 2012 at 07:52:45 PM PDT

        [ Parent ]

    •  It made quite a bit of money, in fact. (0+ / 0-)

      Over 600 mln last year.

      Take a look at EPS and P/E. They are both positive. Of course, P/E is quite high.

  •  could someone please tell me what is so great (20+ / 0-)

    about facebook? Have been on the site a few times and only because others have asked me to "friend" them. However, the site and the information on it reminds me of pretty much a teenagers room online...with all kinds of self-absorbtion and self-obsession about meaningless drivel...posters about what they like. The whole concept is so juvenile. And then, may computer techie keeps telling me to stay off of sites like thsee because of all of the computer viruses they spread.

    There is nothing on facebook remotely of interest to me.

    In my particular case, if there's a dear beloved friend and and interest in me connecting with them...will do it the old fashioned person, by phone or even by e-mail. The benefits of facebook elude me altogether.

    In fact, it reminds me more and more of today's high-tech version of the old pet rock: much ado about nothing.

    •  Not me :-) (8+ / 0-)
      could someone please tell me what is so great about facebook?

      "I'm sculpting now. Landscapes mostly." ~ Yogi Bear

      by eXtina on Mon May 21, 2012 at 01:20:28 PM PDT

      [ Parent ]

    •  I use Facebook to keep up with kids (13+ / 0-)

      and grandkids.

      Nothing quite like a grandchild photo album to brighten my day :-)

      In theory, there is no difference between theory and practice; but in practice, there always is a difference. - Yogi Berra En théorie, il n'y a aucune différence entre théorie et pratique, mais en pratique, il y a toujours une différence. - Yogi Berra

      by blue aardvark on Mon May 21, 2012 at 01:27:40 PM PDT

      [ Parent ]

    •  One thing I have noticed (12+ / 0-)

      about Facebook is that as a middle aged person there are a number of people from way back when that I've been curious about. You know, the "Whatever happened to so-and-so?" thought. So if you see them on FB, you can find out what happened to them and a few details, maybe make a few comments back and forth, but really then your curiosity is satisfied. At this point I don't necessarily need to "be friends" with a lot of them any more. I am glad I had the opportunity to hear what they were up to after 20 years but I'm not sure it goes a whole lot further than that.

      One thing that has been somewhat gratifying though is to see when political or other similar issues come up that they are still mostly all in agreement with me about things - at least the ones I was actually friends with, not necessarily the high school acquaintances I happened to have a math class with. For the most part people don't change all that much.

      •  except for the ones who've, like, gone to prison.. (2+ / 0-)
        Recommended by:
        wilderness voice, eXtina

        ... or the madhouse.   It's not as if these institutions post pictures of their inmates or anything.

        "Bob Roybob, Poofield High Class of 2000.  Now at Sing-Sing Penitentiary serving five to ten years for armed robbery.  Click here to LIKE."

        "Minus two votes for the Democrat" equals "plus one vote for the Republican." Arithmetic doesn't care about your feelings.

        by G2geek on Mon May 21, 2012 at 07:58:29 PM PDT

        [ Parent ]

    •  I use it to network (9+ / 0-)

      in progressive politics

      if I want to talk to my friends...I'll just, you know, talk to them.

      Yes, it is bread we fight for - but we fight for roses, too! Sick of the endless battles, namecalling and hostility? Join Courtesy Kos -- A group dedicated to respect and civility.

      by rexymeteorite on Mon May 21, 2012 at 01:35:50 PM PDT

      [ Parent ]

    •  I'm older (47) (10+ / 0-)

      And I use it to keep track of cousins and friends scattered across the world.  Seeing pictures of their kids or learning about life events - for this it is good.

      'Osama Bin Ladien is still dead and GM is still alive' - Joe Biden "Dems kill terrorist. The GOP keeps them around as a boogeyman - so they can continue to steel."

      by RichM on Mon May 21, 2012 at 01:39:19 PM PDT

      [ Parent ]

      •  that's great...although (1+ / 0-)
        Recommended by:

        this can easily be accomplished with a group e-mail with photos attached

        •  Not as seemless... (5+ / 0-)

          As Facebook.  That's the beauty of it.  Facebook manages your 'e-mail' list by allowing social groups to be formed.  Keeping track of an e-mail list is more cumbersome.  What if somebody changes their ISP and their e-mail?  What if it gets bounced and I have to resend it?  Who gets to use the list?  Is it hosted someplace other than my computer?

          'Osama Bin Ladien is still dead and GM is still alive' - Joe Biden "Dems kill terrorist. The GOP keeps them around as a boogeyman - so they can continue to steel."

          by RichM on Mon May 21, 2012 at 03:24:11 PM PDT

          [ Parent ]

          •  good point... (1+ / 0-)
            Recommended by:

            a little like having your own web page, without all the hassle, perhaps?

          •  bah humbug. (2+ / 0-)
            Recommended by:
            wilderness voice, eXtina

            Email list management is easy.  Really, trading away one's privacy to a dossier-compiling surveillance monster for the sake of a little more convenience managing a mailing list, does not bode well for the continuation of humans as an intelligent species.  

            On the other hand, look at the bright side: when the "evolutionary bottleneck" comes, all these people who can't be bothered to perform basic tasks in their environments, will gracefully exit the gene pool, and the result will be a stronger & smarter species.  Hmm...

            "Minus two votes for the Democrat" equals "plus one vote for the Republican." Arithmetic doesn't care about your feelings.

            by G2geek on Mon May 21, 2012 at 08:45:48 PM PDT

            [ Parent ]

    •  I'm not inclinced to use social media unless it is (3+ / 0-)
      Recommended by:
      TofG, eXtina, G2geek

      networking professionally.

      The idea behind Face Book and other similar sites has always annoyed me.

      I just don't think anyone cares where I just drove, what I just bought online, or what I just ate. the whole tracking, this is what I am doing/did, and this is what I bought or where I was stuff just reminds me of children gossiping about inane junk.

      Some of the functions are directly ties to advertising for companies to those people (were I connected to them or on a social network) which transfers some easy product information for them at our expense.

      I love tech, been a tech geek since I was a teenager, but the whole social network 'friending' experience has always been laughable to me. People who like you/friend you online because of one thing you ate, one movie you like or one song you both seem to share enjoyment from, or a product, or anything - are.not.friends. They're not even acquaintances really. I don't get it, and I suppose I don't want to.

      -6.38, -6.21: Lamented and assured to the lights and towns below, Faster than the speed of sound, Faster than we thought we'd go, Beneath the sound of hope...

      by Vayle on Mon May 21, 2012 at 01:43:01 PM PDT

      [ Parent ]

    •  Depends how you use it (3+ / 0-)

      And who your "friends" are. I get to keep up with daily life (complete with pictures) of friends and colleagues in Sri Lanka, Nigeria and Italy. Absent FB I'd probably not hear from them more than once or maybe twice a year - and without the visuals. I have uncles, aunts, cousins stretched from Southern California to eastern Ontario, Canada. I might see some of them at a reunion once every 5 years or so. Now i know how they are doing in general, what their kids are up to, who's got a special relationship or a significant career milestone, etc. I like to know that stuff - and not from a form newsletter at Christmas or a 10 minute update at the next reunion.

      from a bright young conservative: “I’m watching my first GOP debate…and WE SOUND LIKE CRAZY PEOPLE!!!!”

      by Catte Nappe on Mon May 21, 2012 at 01:58:58 PM PDT

      [ Parent ]

    •  That says you don't like your friends (2+ / 0-)
      Recommended by:
      eXtina, wdrath

      Facebook does have one good feature.  If you just want to connect with a few close friends, or a small group, you can do just that.  Your feed will show only what you want it to.

      Now if you don't like the self-absorbtion and self-obsession of your friends and don't like what they post, get different friends.

    •  it's not so dissimilar from dKOs IMO (2+ / 0-)
      Recommended by:
      eXtina, FG

      in the community aspect. a bunch of friends and family are there, so you chat with them, share interesting stuff back and forth, occasionally debate things more seriously than they possibly warrant. it's not facebook itself, it's all the people you know on it. coordinating all that conversation through email lists would be more clunky, so people gravitate to the infrastructure facebook provides.

      not to say that the corporation isn't evil, just that the users aren't all idiots.

      but please, don't let me get in the way of you feeling smug.

      • not feeling at all smug.... (1+ / 0-)
        Recommended by:
        eXtina simply saying, since the value of facebook was raised on this site, that this particular individual finds no value in it...if you do...that's fine...have at it. It's my way of saying that it comes as no surprise to me that facebook's financial value may also be...overrated....

      •  except that Markos doesn't compile dossiers... (1+ / 0-)
        Recommended by:

        .... on all of us.  Or post automatic biographies of us complete with every picture since the day we were first put in diapers.

        "Minus two votes for the Democrat" equals "plus one vote for the Republican." Arithmetic doesn't care about your feelings.

        by G2geek on Mon May 21, 2012 at 08:49:53 PM PDT

        [ Parent ]

    •  Facebook is GIGO, garbage in garbage out (2+ / 0-)
      Recommended by:
      eXtina, Wheever

      ...IF that is what you and "friends" put up on the site. Otherwise, not so much.

      I keep in touch with friends in Japan, Canada, and the US, and my daughter puts up environmental articles (and pics of her & my grandsons -insert smiley face- ).

      I use it as an activist , raising awareness of issues ignored in the MSM, Climate crisis, wars, protests, loss of Civil rights, generating support for calling elected (and non-elected) people, signing petitions, or posting videos, and many more things.
      So do my various friends (some are real life friends, but live far away), along with good music put up by musician friends...and I've found people  with whom I am happy to have met (& may meet in the physical world someday) , people that I otherwise would've never known.

      In short, it's bulletin board and at age 61 it allows me to to do many things that otherwise are not available to me.

      without the ants the rainforest dies

      by aliasalias on Mon May 21, 2012 at 02:20:14 PM PDT

      [ Parent ]

  •  I hate facebook (8+ / 0-)

    I have a friend who I helped out when he needed money - I let him stay in my guestroom for over a year. Then he got a temporary contract in the UK for a 2-year gig. I still have all his stuff in my spare room, but not a word about how he's doing or anything. I finally did reach him and he said "I don't email anybody any more. I just post on Facebook. I figured if you want to know how I'm doing, you'd just go there are read it yourself."

    Ah. so personal.

    •  I would start charging him rent (2+ / 0-)
      Recommended by:
      eXtina, lost

      -- he is working after all.   If you don't get a check in a month, then his stuff goes in the trash.   Put a post to that effect on his facebook page.  

      Republican marriage is between one man and one another woman on the side.

      by Alan Arizona on Mon May 21, 2012 at 04:43:43 PM PDT

      [ Parent ]

    •  the f---ing Borg factor. (2+ / 0-)
      Recommended by:
      wilderness voice, eXtina

      Like this:

      I've given up all my privacy.  If you want to talk to me, you have to do likewise.

      And like this:

      How do you like my new house?  No walls!  The kids don't mind seeing us having sex, they got used to it.  When they become teenagers, we'll watch them too!  And if you come over to visit, you'll get used to using the toilet with an audience.  Isn't transparency wonderful?  


      Seriously: what I would do with that guy is tell him in no uncertain terms that you refuse to submit to a privacy-destroying monster, and if he doesn't start sending you rent checks for storage, you are going to sell all his stuff on Ebay and include his Facebook link on every auction.  

      "Minus two votes for the Democrat" equals "plus one vote for the Republican." Arithmetic doesn't care about your feelings.

      by G2geek on Mon May 21, 2012 at 08:55:48 PM PDT

      [ Parent ]

  •  Facebook had lousy timing (7+ / 0-)

    Having their IPO at the end of the worst 3 week period in a year didn't help.

    I wonder if Eduardo Savuein will ask for his citizenship back when it turns out he's only saving $20M in taxes :-)

    In theory, there is no difference between theory and practice; but in practice, there always is a difference. - Yogi Berra En théorie, il n'y a aucune différence entre théorie et pratique, mais en pratique, il y a toujours une différence. - Yogi Berra

    by blue aardvark on Mon May 21, 2012 at 01:26:34 PM PDT

  •  I have to admit to to laughing out loud when (9+ / 0-)

    I hear the news reports on this.

    Finally, this time those ciphers on Wall Street didn't find enough suckers to buy into their hype.  

    Maybe the American people are finally getting it that the almighty "market" everything seems to ride on is a giant gambling den.  And the little guy "investing" in it is one giant con.

    If the plutocrats begin the program, we will end it. -- Eugene Debs.

    by livjack on Mon May 21, 2012 at 01:34:09 PM PDT

  •  I hadn't thought about it much either way (2+ / 0-)
    Recommended by:
    eXtina, Lying eyes

    but I read a contrarian view by an elderly friend that I found somewhat thought-provoking:

    FB is worth billions. Which has been true for many weapons-makers, hedge-fund operators, third world dictators and first world money manipulators. Why not this strange and sort of wonderful thing created by a bunch of smart young guys in a dorm room that--so far--does no harm.
    Of course just because it's kind of cool doesn't mean the banks didn't drastically over-value it.

    I quite like it -- I get a lot more daily-life info on my distant loved ones than I otherwise would.   Less personal in a way, it's true, but on the other hand we'd never all stay in such close touch without the kill-many-birds-with-one-stone aspect.  However I don't "friend" anyone with whom I would not go out to lunch, nor do I give out any permissions to the zillions of invasive apps.  Just the basic interface has quite enough invasiveness to hold me.  

    "The extinction of the human race will come from its inability to EMOTIONALLY comprehend the exponential function." -- Edward Teller

    by lgmcp on Mon May 21, 2012 at 01:40:08 PM PDT

  •  +Down 11% at 11 am where did it close? (3+ / 0-)
    Recommended by:
    eXtina, grrr, G2geek

    Comments made the banks offering the shares didn't want to prop it up with hundreds of millions of shares sloshing around looking for suckerr,-buyers.  Commissions selling on Friday, and more commissions on sellers, or buyers at the reduced price today.  It is all about the commissions with these guys.

    Now they are smart and claim it should have been half the number of shares in the IPO and a demand greater than the supply, yadda yadda, yadda.   I see it as the big privatel shareholders could sell it without swamping the market. Tuck away a few billion.  Zuckerberg lost over 2 billion today compared with cashing in some Friday.  That is newsworthy, I guess.

    This currently under construction..

    by BeeDeeS on Mon May 21, 2012 at 01:57:51 PM PDT

  •  i wouldn't be surprised if this isn't possibly (4+ / 0-)
    Recommended by:
    eXtina, greengemini, FiredUpInCA, G2geek

    the other way around, with big trading houses trying to push the stock down in order to buy it later at a discount, and to humiliate the upstart techies with their hoodies as a bonus.

    hard to say, the stock market is pure speculation these days, pretty delinked from the real economy it purports to reflect.

  •  I think $40 is pretty fair actually (2+ / 0-)
    Recommended by:
    eXtina, Lying eyes

    *Facebook had net income of 1 billion in 2011, which is a profit margin of 27%.  

    *Cash flows from operating activities was a very healthy 1.5 billion in 2011.  

    *They are sitting on 1.5 billion in cold hard cash, and have zero long term debt.

    *Revenues have been growing briskly since they started.  

    I'm not a fan of facebook by any means, but I think the valuation is pretty accurate.

  •  Pump, meet Dump (4+ / 0-)
    Recommended by:
    FiredUpInCA, eXtina, Reepicheep, G2geek

    "..The political class cannot solve the problems it created. " - Jay Rosen

    by New Rule on Mon May 21, 2012 at 04:10:14 PM PDT

  •  schadenfreude misplaced (2+ / 0-)
    Recommended by:
    eXtina, G2geek

    If they lose money on this deal they'll screw investors out of it some other way.  If they fail at that they'll screw mortgage holders and other debtors. If they fail at that they'll just expect to get bailed out some more.

  •  Goldman did this with (3+ / 0-)
    Recommended by:
    G2geek, wilderness voice, eXtina

    a lot of internet businesses in the dotcom bubble. Matt Taibbi described it as throwing a melon out of a high rise window and betting on how long it will take to hit the ground. Start-up companies with three or four employees were being insanely overvalued, because Goldman's strategy was pump-and-dump. They massively over-hype a company's value to their customers, and in the meantime Goldman has taken a short position on that same company. They are betting on the IPO crashing.

    "YOPP!" --Horton Hears a Who

    by Reepicheep on Mon May 21, 2012 at 06:17:25 PM PDT

  •  What difference do short-term fluctuations (0+ / 0-)

    in FB stock price make? It still has a market value over 70 bln.

    •  Actually, short term fluctations make a huge (1+ / 0-)
      Recommended by:

      difference because that is what a fair amount of investment is based on.  Remember, these are people who decided that trading at 90,000 miles per second wasn't fast enough so they replaced their direct coax cable line into the stock exchange with a fiber optic line so they could trade at 186,000 miles per second instead.

      There is no saving throw against stupid.

      by Throw The Bums Out on Mon May 21, 2012 at 07:16:03 PM PDT

      [ Parent ]

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