Facebook stock given thumbs down

23 May 2012, 7:13 pm   -   Source: Ricardo Goncalves, SBS
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Facebook may have debuted with much fanfare, but so far it has been given the thumbs down by investors.

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Facebook may have debuted with much fanfare, but so far it has been given the thumbs down by investors.

“Big asset managers and analysts were not really convinced that the valuation was correct or the pricing was right,” said Kenneth Polcari, an equity trader at Icap. 

$16 billion dollars has been wiped from the company's value since listing, catching some investors off guard.

“We call them flippers, those that buy the stock on the public offering with the intention of selling it as soon as they have a profit, which they don't this time,” said advisor Hugh Johnson.

The Nasdaq has also come under fire as technical hitches delayed trades.

"While clearly we had mistakes within the Facebook listing we still want to highlight the fact it was the largest IPO ever," Nasdaq CEO, Robert Greifeld, said.

But it was not the most successful.

On day one of their respective IPO’s Google shares rose 18 per cent while professional networking site LinkedIn surged 109.

Time has been good to Google which has seen its share price climb 600 per cent since 2004 while LinkedIn added 125 per cent since last year.

While it is very early days for Facebook it still has a lot of catching up to do.

Facebook CEO Mark Zuckerberg is being encouraged not to focus on the day to day moves of his company's share price.

“The markets go up and down, we saw that with AOL, we were a company with US $70 million a decade, later it was US $150 billion. As long as you keep focussing on the product and keep innovating, that's what really matters,” said AOL co founder Steve Case.

It is a thought mirrored by analysts at Morgan Stanley and Goldman Sachs who revised their financial forecasts for the company because of an increasing trend of Facebook users turning to mobile devices instead of desktops.

It is a platform Facebook has not been able to successfully monetise.

More concerning are claims these financial revisions were made in the lead up to Facebook's listing and only passed on to some potential investors.

“In this case, Morgan Stanley is not only a respected company, but it is an underwriter of the shares,” said Mr Johnson.

Morgan Stanley says it has followed the rules.

The Securities and Exchange Commission is looking into the issue.

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