What Does Facebook's Botched IPO Mean for Retail Investors?
Jun 04, 2012 in Business/Finance. 0 Comment
In what has been called the worst IPO starts in the past five years, social network giant Facebook has endured a declining market value since it opened to the public on Friday, May 18, 2012.
Facebook was initially valued at $38 per share, but its performance has not indicated to investors that a big payday is in the near future. On the first day, shares barely budged from the initial asking price. Analysts say investors should steer clear of the newborn stock, which has all the hallmarks of an over-hyped tech bubble.
Weak Debut
First, the lackluster debut of the company breaks investor confidence. In a similar example, General Motors, which went public in 2010, had a weak debut losing over 3 percent on the first trading day; now, GM market price is 38 percent below its first-day close. Experts say that Facebook’s tepid first-day close and continued decline portend poor earnings growth.
Unproven Business Model
Facebook’s unproven business model is another factor that adds to the stock's volatility. Facebook was valued at over $1 billion due to its reservoir of personal user data. While it is certainly a cultural phenomenon, investors aren’t sure how Facebook will live up to its billion dollar value now that it’s a public company.



