Facebook Shares Fall Below IPO Offering Price

Facebook shares plunged over 13 percent on Monday for its second day of trading. Facebook shares initially opened at $38 per share and it is now trading at $33 per share. In Facebook's initial trading, more than 52 million shares were trading hands within 15 minutes.

By: CNBC.com With Wires
Published: Monday, 21 May 2012
CNBC

Facebook shares [FB 33.7393 -4.4925 (-11.75%) ] plunged more than 13 percent on Monday, falling below the $38 price of the initial public offering, in the social network's second day of trading as a public company.

The stock sank without the full support of the company's underwriters, leaving some investors down nearly 25 percent from where they were Friday afternoon.

Facebook's debut was beset by problems, so much so that the Nasdaq said on Monday it was changing its IPO procedures.

That may comfort companies considering a listing but does little for Facebook, whose lead underwriter Morgan Stanley [MS 13.295 -0.055 (-0.41%) ] had to step in and defend the $38 offering price on the open market.

Without that same level of defense, Facebook shares plunged in the first minutes of trading on Monday. That represented a decline of more than 12 percent from Friday's close and about 24.4 percent from the intra-day high of $45 a share.

Volume was again massive with more than 52 million shares trading hands in 15 minutes.

Nearly 581 million shares were traded on Friday in the five or so hours that the stock was open.

As the stock fell, there was a long list of questions—ranging from whether the underwriters priced the shares too high to how well prepared the Nasdaq was to handle the biggest Internet IPO ever—and few immediate answers.

"It was just a poorly done deal and it just so happens to be the biggest deal ever for Nasdaq and they pooched it, that's the bottom line here," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

Nasdaq said Monday morning the changes it was making would prevent a repeat of what happened Friday, when glitches prevented some traders from knowing for hours whether their trades had been completed.

The exchange also said it would implement procedures to accommodate orders that were not properly executed last week.

A source said Morgan Stanley's brokerage arm still had a "large number" of share orders from Friday that were not confirmed, which it was working to resolve.

A Facebook spokeswoman declined to comment on the share price issue.

But analysts said that after the initial frenzy, investors were quickly becoming cautious about the stock.

"Investors are increasingly aware of the risk embedded in the stock price. There are real concerns about growth and advertisers' frequent lack of certainty how best to use Facebook, along with rising costs and ongoing acquisition risk," said Brian Wieser at Pivotal Research Group, who has a $30 target on the stock.

"At $38, the stock is priced for perfection in a manner that implied that risks were negligible," he said.

Facebook's market debut Friday suffered some hiccups, with trading on the Nasdaq delayed for a half hour and issues with traders' orders. The stock closed Friday just 23 cents above where it priced Thursday night, when many investors had hoped for a big first-day pop.

In a release, Nasdaq [NDAQ 22.28 0.29 (+1.32%) ] explained why the start of Facebook's trading was delayed on Friday. The company's CEO shed further light on the delay in an interview on Sunday with CNBC's Maria Bartiromo.

"After the calculation of the FB IPO Cross was completed, but before printing the opening trade, additional order modifications were received by the system, changing the auction order book," the release said.

To factor in the new book state, the system then recalculated the offer's auction. This caused further delay.

"Again, changes were received before the IPO cross could print the opening trade, which resulted in additional re-calculations," Nasdaq said. "This condition persisted, resulting in further delay of the opening print."

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