Facebook's IPO - how low can it go?
Publish date: 06 June 2012
Issue Number: 1437
Diary: Legalbrief eLaw & Management
Two weeks after the largest, most anticipated IPO in years, Facebook shares keep going down. And down. And down. And investors want to know how far they can go.
The Internet's dominant social network went public on 18 May in a $16bn share sale, the second largest IPO in the US. A report on the IoL site notes that during Monday's trade, the shares hit $26.44, more than 30% below the initial public offering price of $38, before rebounding slightly to $26.90. According to the report, Bernstein Research analyst Carlos Kirjner forecast a price of $25 over the next 12 months, but added that a real possible slowdown in Facebook revenue growth 'will likely drive additional downside pressure on the stock beyond what is already reflected in our price target'. Oliver Pursche, president of Gary Goldberg Financial Services said there are real signs that Facebook may be in real trouble and could turn out to be a disastrous investment, the report notes. 'We told people to stay away because we didn't and still don't know how it was valued,' Pursche is quoted in the report as saying. The report states Bernstein Research's $25 estimate takes note of the company's great potential but also its still-unproven ability to fully tap that potential - whether it can make social network-based advertising as effective as, for instance, Google's search-based ads, and if it can do so as fast as many investors expect. Full report on the IoL site