Facebook’s stock dropped four percent (87 cents a share) and hit the $19 mark briefly before finally closing at a not-much-better $19.05 when the trading day concluded. Shares were down nearly 13 percent over the week that was.
With the IPO’s price set at $38 per share, the $19.05 mark has to be humiliating for Mark Zuckerberg’s sweetheart. Word around the campfire is that he’s lost about $600 million in the stock’s stunning skydive.
The most recent drop appears to be a result of the cessation of a so-called “lock-up period” that prevented investors from selling shares. Now that the period has expired, stakeholders can dump their shares in the company. It is expected that the news sent shares tumbling.
We won’t know just how many shareholders sold shares until Facebook releases those numbers sometime this week. Sellers are required to disclose that information, so the social networking company won’t be able to hide the results.
There is some bad news for other early investors not belonging to the Goldman Sachs club, sadly. They’ll be stuck with their stock until mid-October at the earliest, when more become available to sell. As one might imagine, there’s an awful lot of desire out there to exorcise Facebook shares.
A lot of companies struggle when it comes to going public. Facebook thrived prior to its forced focus on revenue and a number of factors, including overvaluation of its stock, led to its current state.
It’s interesting to consider what this means in the larger picture. Facebook’s IPO has been derided by a number of sources as all that’s wrong with tech-based public offerings. The frenzy behind tech companies has gotten out of hand – or so the argument goes. The fact that stock yardsticks like the NASDAQ Composite index are reaching year-highs seems to reinforce this assessment.
Facebook’s bankers and backers must bear some of the blame. A number of mistakes, from bankers failing to respond to shifting projections to the NASDAQ software error that bungled the opening, dogged the shares from the start. Given the intransigent nature of the stock market, it shouldn’t be surprising that things have plunged this much.
Combine those issues with the fact that Facebook is still stumbling around looking for consistent revenue streams and the formula for falling stock emerges.