Facebook Sinks To Record Low As Doubts Grow
SAN FRANCISCO — Facebook Inc.'s shares slid 6.2
percent to another record low on Tuesday (Wednesday in Manila), diving
for the third straight day since lackluster results showed decelerating
user growth and revived doubts about its ability to sustain its rich
valuation.
A sobering report from Bernstein
Research, combined with online chatter about the potential proliferation
of automated Facebook accounts and a looming sell-off of employee
shares next month all conspired to rock the stock, analysts say.
Facebook has lost more than 40 percent of its value since becoming on
May 18 the first American company to debut with a value of more than
$100 billion.
The stock, down 6.2 percent at $21.71, still trades at more than 40 times forward earnings, versus Google Inc.'s 15.
Investors have punished the stocks of the No. 1 social network and
other consumer-focused Internet companies such as Zynga Inc.,
questioning their ability to sustain growth and maintain lofty
valuations.
Last week, Facebook reported results
but offered no outlook or forecast for the year, disappointing
investors who had hoped for affirmation of its growth prospects.
Wall Street is also bracing for a potential deluge of hundreds of
millions of shares after August 16, when Facebook employees can sell
their company-awarded shares for the first time.
"It's a combination of the Bernstein note, and partly complaints about
the Facebook bot. Lockups are also causing pressure on shares today,"
said analyst Herman Leung of Susquehanna Financial Group, which owns and
is a market maker in Facebook shares.
"People
are just wondering what the next update is, and there's more headwinds
than not. But the long-term story still feels intact."
Facebook's IPO was to have been the culmination of breakneck growth for
the company that Mark Zuckerberg started 8 years ago in his Harvard
dorm room. Instead, the May 18 Nasdaq debut was marred by trading
glitches and accusations of inadequate disclosure.
On Tuesday, UBS blamed a 349 million Swiss franc ($360 million) loss
from Facebook's botched debut on exchange operator Nasdaq, becoming the
latest financial investment institution to report a hit from the first
day of trade.
UBS said orders for the stock had been entered multiple times due to a systems failure.
Facebook bot
Compounding Facebook's woes was a Tuesday report from Bernstein
Research analyst Carlos Kirjner that valued its display advertising
business at just $19 a share, half the company's $38 IPO price.
Kirjner set Facebook's 12-month target price at $23, placing a $4
premium on what he said was untapped advertising potential around the
company's innovative social graph. But, that potential remains "yet to
be defined and built," he wrote.
Kirjner on
Tuesday upgraded Facebook to market perform, but suggested that the
lockup's expiry, which could unleash up to 211 million shares, will
weigh on the stock.
The size of the current float could be nearly tripled by November, as more and more employees begin to sell, Kirjner warned.
Finally, an Internet startup late on Monday publicly called into
question Facebook's user-number claims, igniting debate among industry
executives and on the Internet.
A commerce site
called Limited Run, in announcing that it was deleting its Facebook
page, claimed that 80 percent of its ad-clicks on Facebook came from
"bots" or automated accounts, and only a fifth from genuine users.
"We're currently investigating their claims," said an external spokeswoman for the social network. — Reuters
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