Facebook Inc. (FB) shares fell to their lowest level yet on the NASDAQ exchange. The stock was issued at $38 dollars a share but plunged today to $17.55 before a slight recovery, going even lower than its historic low last Friday.
Back on May 17, Morgan Stanley, a leading underwriter of the company's original public offering( IPO) cut its forecast price on Facebook shares as many are concerned that the company is not reaching mobile users with its ads. There have been many complaints about the price set for the original shares. Many analysts thought quite correctly they shares were very much overvalued. Shares are now less than half the price of the original offering.
More Facebook users access the site through smartphones and tablets. In doing so the users are exposed to fewer ads. On desktops users would see 30 times as many ads than on mobile devices.
Scott Devitt, an analyst at Morgan Stanley in New York, now predicts that Facebook shares will reach just $32 dollars per share within the next year rather than the 38 dollars he had predicted earlier. Another analyst at JP Morgan Chase and Co. argued that Facebook may also make less money from games than previously predicted. The analyst said:“The dynamics around social gaming have changed, leading to lower monetization for Facebook...Web games now operate in a more competitive space, and users are rapidly shifting to mobile devices where Apple and Google control app distribution and payments.”
Advertising research company EMarketer Inc. lowered it estimate of 2012 revenue for Facebook from $6.1 billion in February to $5.04 billion now. Even so advertising revenues are still predicted to grow by 34% in 2012 and 29% in 2013. However, this compares with an increase of over 68% last year. Growth in the second quarter was 32% but this was down from 45% in the first quarter. Obviously investors had unrealistic expectations about the pace of growth in revenue.
Facebook is facing the expiration of lock-up periods during which company insiders and also some major stakeholders were unable to sell their shares. Now that the lock-up time has expired shares are flooding the market driving the price down along with the other factors mentioned. Stock Twits site has been flooded with Facebook criticism: For example: menax73: $FB is this symbol for "Fail to Bounce" LOL.