Flotation a distant memory as Facebook trades at half IPO price
IT was one of the most hyped flotations in history, but there is little now to like about Facebook's initial public offering (IPO).
The company went public at $38 (€30.79) a share in May, but the stock is now trading at about half that price. Despite a strong gain yesterday, by mid afternoon in New York shares were valued at $21.62, a decline of 48pc on the IPO price.
The company was hit by a double whammy yesterday. Amid reports that institutional investors were pulling out of the company, the social network admitted that as many as 83 million of its 955 million users may be "fake".
The firm said close to 10pc of its 955 million users were family pets and other "undesirable" elements, reducing the amount of users it can trumpet for revenue growth.
That admission came as reports said funds controlled by Fidelity Investments, one of the biggest US investment firms, apparently sold 1.9 million shares in Mark Zuckerberg's company in June. The firm was a big backer of Facebook when it was still private and bought more shares after the company came to the public market.
Companies that had bought shares in Facebook when it was private could sell shares in the IPO, but are barred from selling more of those "private" shares for a number of months yet. However, any shares that were bought after Facebook became public can be sold immediately.
Institutional shareholders usually buy shares and hold them for long periods of time, close to two years on average.
Fidelity could only have held the Facebook shares it sold for a maximum of seven or eight weeks. A number of other investment firms are believed to have sold at least part of their holding in Facebook as well.
The perceived failure of Facebook has led some analysts to call the end of the so-called "technology bubble" of 2010-2012, which saw a host of internet-based companies hit enormous valuations very shortly after being set up. A number of them went public at huge sums despite low revenue or non-existent profit models.
Of the major tech firms to have gone public in the past two years, only the professional networking site LinkedIn has grown, with shares up 48pc so far this year. On Thursday LinkedIn raised its revenue and profit targets after posting strong quarterly results.
In contrast, apart from Facebook, the internet gaming company Zynga is down 71pc this year, while coupon site Groupon is down about 80pc in 2012.
All this could be bad news for Ireland, with state bodies trumpeting the country as a centre for technology firms.
Facebook employs more than 400 people in Dublin, while Zynga and LinkedIn are just two of a host of companies that have opened offices here in recent years.
Last night, however, an IDA spokesman said the development agency had no such concerns.