August 18, 2012
Facebook Stock Hits All-time Low
Lee Rannals for redOrbit.com - Your Universe Online
If it seems too good to be true, it probably is. Facebook is learning that phrase the hard way, as its stock price reaches an all-time low, in the middle of never really quite living up to what it was supposed to.
On Thursday, Facebook's stock price ended at $19.87, which was nearly 50 percent lower than its original offering price of $38 in May.
The worry hasn't stopped yet either, as the social network's shares were down even further than that on Friday.
While some analysts shout out numbers of a $38 price tag for the company, other analysts, who now seem to have been more realistic, warned of the failure.
Analysts knew before the IPO that Facebook's business plan wasn't up to par compared to that of companies that successfully trade on the stock market. They warned about how Mark Zuckerberg's empire isn't exactly turning a profit every year, and its vision to do so was lacking.
Now, the company talks about how its mobile user growth is on the upswing and could one day outpace its desktop user growth. It has been pointed out that this is not a good move, because its desktop user growth has more opportunity to initiate some revenue.
The company is now feeling the full force blow on Wall Street, by watching its stock price slide day in and day out.
Facebook's revenue largely comes from advertising and money driven in from its virtual games people play on the social network.
The social network is now experimenting with new ways to make money, including creating new advertising tools and offering new online gambling to its users in Britain.
"This was the most anticipated IPO in many years and it was like an exploding cigar," Barry Ritholtz, head of research firm Fusion IQ, told the Los Angeles Times. "Every investor thought they were about to become wealthy beyond their wildest dreams, and they had this blow up in their face."
During this week, a select number of early investors were allowed to sell their shares in the company for the first time. At the beginning of the IPO, many investors like Zuckerberg sold off a big chunk of shares to cash in on the high price before it plummeted.
Facebook employees will have the opportunity to sell their shares in the company later this year, and according to most analysts, it would most likely be a good idea.
Even in the midst of a failing stock debut, Zuckerberg has tried to be positive with his employees about the stock fluctuations.
"Mr. Zuckerberg went on to tell employees that the press doesn't know the company's future plans, and if they did, they would have the same faith in Facebook's ability to fulfill its lofty stock-market valuation," Shayndi Rice of the Wall Street Journal wrote.