It's well known, it's in need that one knows what one's friends are really worth. Barely three sessions after its IPO, Facebook's are already worth much less... 21 dollars less each to be precise. Because, since its listing on the Nasdaq, the social network's value to the 900 million users has already lost 19 billion dollars.
The Facebook headline continued his downfall on Tuesday, May 23rd, prompting several analysts to criticize the banks' handling of the IPO. The price of the community networks champion plunged from 8.55% to $31.12 at the close Tuesday in a slightly declining market, after hitting a low of $30.94 during the day. In total, the FB share has lost 18.42% since it closed at $30.94. The share's value has declined by 18.42% since it closed. IPO on Friday. .
Many are already talking about failure but, worse, they blame the banks that organised the operation, mainly Morgan Stanley, but also JPMorgan Chase and Goldman Sachs, which had the leading roles among the eleven banks mobilised. "They failed completely," says Michael Pachter, an analyst at Wedbush Securities. In his opinion, they probably put too many stocks on the market at too high a price. More importantly, some investors were apparently aware that Mark Zuckerberg's company's forecasts were overestimated.
Facebook's historic introduction is gradually turning into a stock market scandal...
Four days later, the Facebook IPO remains a complete fiasco. And we're not done talking about it yet! Some investors knew Facebook was overvalued.
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On Tuesday, a new controversy emerged as the very serious high tech Business Insider website revealed that analysts at the three main banks involved had lowered their expectations for the website's results just days before the IPO. They had even warned some of their customers, who would have lost interest in the stock.
According to the site, it all started in early May; as Facebook was about to start its preIPO investor tour ("roadshow"), social network analysts put in place forecasts to help with marketing and the IPO price. A common practice, but one that appeared far too optimistic.
"If these charges are true, they fall under the jurisdiction of Finra and the SEC," said a Finra spokesman. "I think there's a lot of reason to have confidence in our markets and their integrity, but there are issues that we need to look at, especially when it comes to Facebook, SEC Chairman Mary Schapiro told reporters on Wednesday, following a Senate hearing.
According to CNBC Financial Channel, the state of Massachusetts has cited Morgan Stanley to appear on the case.... Morgan Stanley defended itself in a press release stating that it "followed the same procedures for the Facebook share offering as for all other IPOs", ensuring that they "comply with all regulations".
Morgan Stanley defends himself
The investment bank points out that Facebook had "published an additional forecast on May 9 (...) and "a copy was sent to all investors", not to mention that this update of Facebook's forecast was "widely covered by the press". The 900-million-user site said at the time that its turnover was continuing to grow at a slower rate than the number of users - revealing the continuation of a trend it had already mentioned.
These new forecasts have prompted "a significant number of analysts (...) to reduce their earnings forecasts" and they have been "taken into account in setting the price" of the share's launch, Morgan Stanley concludes. Some analysts also pointed out how difficult it is to set the price level of a company that, like Facebook, attracts enormous public interest.
Already the banks are suspected of backing the course on Friday...
On the first day on the stock market, Friday May 18, suspicions had already been raised about support from certain American banks. Morgan Stanley was accused of showering the stock with billions of dollars, in order to maintain the price above the introductory price.. It was this bank that spearheaded the Palo Alto firm's flotation on the stock market.
This kind of manipulation is not uncommon in the case of halftone introductions. LeFigaro.fr notes that everyone seems to have forgotten it, but it is what had happened when EDF was introducedon December 12, 2005.
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The Nasdaq is not blameless either. Many problems arose during the first day, due to the large number of applications to be processed. "Clearly, we made some mistakes in the Facebook listing, but we still want to point out that this was the largest IPO ever and that last Friday we processed more than 570 million titles," said Nasdaq OMX CEO Bob Greifeld.
Mark Zuckerberg sees billions of dollars go up in smoke...
Already, on Monday, the founder of the social network could deplore a virtual loss of 2 billion in the space of two days. After this third day in the red, his 503.6 million shares are now "only" worth $15.67 billion, compared to $19.14 billion at the time of the IPO. That's $3.47 billion less.
Harvard's little genius is still pointing at the 39th place in the Bloomberg ranking of the richest men in the world, which is 40. If Facebook drops again this Friday, it could be out of the rankings.
The Facebook action would actually be worth... $9.59!
"It's very difficult to understand the real investor demand for a stock because they don't tell the banks the exact number of shares they want," says Lou Kerner, founder of the Social Internet Fund. According to him, the technical difficulties of the Nasdaq electronic market to manage the volume of orders on the first day, Friday, only added to the difficulties inherent to these operations, as did the decision of the manufacturer General Motors, announced on May 15, to no longer advertise on Facebook. However, Lou Kerner remains optimistic about the "potential" of Facebook: within 6 to 12 months, "today's exchanges will be nothing more than background noise".
Rick Summer, of the analyst firm Morningstar, is more cautious: "We think the company is in trouble in the short term. Slower sales and pressure on operating margins could push the price down further," he warns.
According to Wall Street estimates compiled and analyzed by Thomson Reuters StarmineThe reasonable level for the Facebook share, given the group's earnings outlook, would be $9.59 - a quarter of its IPO price.
"It's terrible for the markets." commented former SEC Chairman Arthur Levitt. "This is an event that will have lasting negative implications for a sector that can ill afford this kind of problem, and the final chapter has not yet been written. »
(Source: Huffington Post / May 23, 2012)