Facebook Stock A "Falling Knife"Cecily Kellogg
So, Mark Zuckerberg has lost over two billion dollars in the last two days.
Holy CRAP, y’all.
This was NOT supposed to happen. Facebook fell 11% yesterday during trading, and today dropped yet another almost 9%. 20% in two days is pretty lousy.
There are many contributing reasons to why the stock has fallen so far, the most popular of which is the idea that perhaps at $38 a share the stock was priced too high to start with.
Dave Rovelli, managing director of US equity trading at Canaccord Genuity in New York, states, “They shouldn’t have opened until 1 o’clock (Friday), until they fixed the glitch.” Rovelli adds, “All the buy-side institutions are shorting it. You can get a borrow on it and everyone’s leaning all over it. There’s no bottom The next catalyst is going to be earnings, which is three months away. So there’s no reason to jump in here. You’re catching a falling knife.”
Overall, experts are suggesting that investors wait a month or two before purchasing Facebook stock, since the next earnings report for the company isn’t due for three months anyway, and until Facebook does a better job with ads on mobile platforms it’s unlikely to really see the profits it needs to see a fact that Facebook anticipates to hit its next earnings report (and something they revealed to investors a few days before the IPO).
Of course, people are looking to place blame, and right now it’s falling on Morgan Stanley because they were the lead underwriter for the sales.
Just days before Facebook raised the size and price of its IPO, the company began telling analysts to lower their sales forecasts, people familiar with the matter said. Morgan Stanley analysts were among those who cut their projections during the roadshow, said one person.
In addition, all those new “Facebook Millionaires” sold their shares, cashing out now (smart move, eh?), which further decreased the share price.
Once again, we’ll have to stay tuned for developments.