Facebook made its eagerly-awaited debut on the stock market last week (not without a few hitches), a move that seemed to excite many people a great deal.
They’ll be feeling a lot less excited now. After the social network’s underwhelming start on Friday, its stock price dropped severely on Monday, despite the rest of the stock market enjoying a strong day.
Put simply, investors don’t seem so convinced by Facebook’s stock market arrival. Stock in the social network closed Monday at $34.03, down 11 per cent from Friday’s closing price of $38.23. While the banks set a debut price of $38 on Thursday, no big first-day explosion occurred – the stock opened on Friday at $42.05 and then hovered unassumingly between $45 and $38 throughout the rest of the day.
All of which means some poor saps have made big losses so far. Which seems mighty strange, for as the AP points out, at first glance not a great deal has changed at Facebook since Thursday to cause such a steep fall. Its 900 million-strong userbase hasn’t simply vanished overnight, and it remains one of the few profitable web companies to float on the stock market.
Yet there are tangible reasons for the falling stock price, argues the AP article. Including:
— Facebook’s IPO occurred the same week that the markets posted their worse performance so far in 2012. The Standard Poor’s 500 index fell 4 percent.
— Meanwhile, Europe was trying to avert financial disaster.
— At the same time, the American public’s love affair with the stock market continued to wane. People have yanked over $400 billion from U.S. stock mutual funds since 2008.
— Banks are being cautious too. All this is happening in the backdrop where banks are under pressure from regulators to become more conservative after the financial crisis. “Regulators want banks to take less risk,” said Larry Tabb, founder and CEO of Tabb Group, a markets research firm. “To support a $100 billion offering can be challenging in this environment.”
—Investors were also spooked by the trading glitches at the Nasdaq stock market on Friday. Some people weren’t sure if their trades had been executed and trading of the stock was delayed by a half hour.
So dare I ask: did anyone gamble some cash on Facebook stock last week?