What a disaster the Facebook IPO has become. As I type FB is trading at 29.50 down 2.42 for the day and $8.50 off the IPO price of $38. Boy did Mark Zuckerberg and Wall Street take investors to the cleaners.-Lou
Facebook Shares Tumble to Fresh IPO Lows
While stocks are jumping out of the gate this morning, Facebook has stumbled again.
Facebook shares are down more than 5% this morning, hitting new lows in the social network’s short history as a publicly traded company. More than an hour into trading, shares are at $30.17. The stock has lost about 21% of its value since going public on May 18 at $38 apiece.
Today’s drop comes on the first day of Facebook’s options activity. Dow Jones’ Kaitlyn Kiernan offers the details:
Facebook options, like the stock in its debut, post impressive first day volume so far. Facebook looks poised to become one of the most-traded corporate options today, with a total of 17,232 options — 7,476 puts and 9,756 calls traded in the session’s first 15 minutes. Bank of America and Apple, which often vie for the largest daily options trading volumes, traded 15,697 and 50,518 options in the first 15 minutes, respectively.
Much has been written about the trading glitches and technical issues that plagued Facebook when it first started trading earlier this month. But as the IPO mania dies down and the stock keeps falling, it’s clear the hype surrounding the stock prior to the IPO has radically shifted from euphoric to bleak.
Walter Zimmerman, senior technical analyst at United-ICAP, points to some of the behavioral finance elements that may be behind the stock’s troubles during its first week and a half of trading.
From the vantage point of behavioral finance the unfolding Facebook IPO fiasco was neither an order flow glitch nor a technical error by the Nasdaq. Nor was the problem a simple share value miscalculation by analysts. All attempts to grasp the Facebook IPO face-plant in these terms is to deal the surface symptoms and to miss the underlying cause.
The Facebook debacle is a textbook case of the collision between human needs and the nature of the financial markets. What went so wrong with this IPO can only be appreciated in terms of the intersection of collective human behavior and finance. The mass psychology of this IPO was that of a classic mania. And that meant a multitude of problems were rendered invisible. We are referring here to two critical and related issues – the timing and the valuation assumptions.