After
the disappointing performance of Facebook’s
stock following its May IPO, shares of the social networking company staged a
pretty remarkable comeback, increasing by more than 20% in June from their
lows. But the great Facebook stock comeback appears to be over for now.
Facebook’s stock fell again on Tuesday,
dropping by more than 2% in morning trading after tumbling by 8% on Monday. The
stock is now down by 17% from its June highs and has fallen by about 27% from
its IPO price of $38.
The sudden July swoon will be
disappointing to employees and ex-employees of Facebook who are sitting on a
boat-load of shares and are waiting to be released from insider lock-ups
starting next month so they can cash-in. Big time venture capital and hedge
funds that invested early in Facebook are in a similar situation and are also
probably checking Facebook’s stock price regularly. There is a lot riding on
what happens to Facebook stock in the next few weeks.
There really is little news driving
Facebook’s stock volatility. One Wall Street analyst speculated yesterday that investors are nervous
that the company’s second-quarter earnings, which will be released on July 26,
will disappoint the market. With 15% to 20% stock swings in either
direction in the space of a few weeks, Facebook’s stock looks like it has
become a plaything of ultra short-term investors.
The
valuation of Facebook has been controversial and tough to peg ever since Morgan
Stanley, the lead underwriter of the Facebook IPO, expanded the
offering and priced it aggressively. The stock has gone up and down like a
yo-yo between a low of $25.52 and a high of $45.Today, at around $27.60, it’s
getting closer to its all-time lows. If there was ever an example of a
short-term speculative investment, this is it.
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