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Tuesday, 22 May 2012 19:45

Facebook slide continues, sheds billions

Written by Peter Scott



A Zucker is born every minute


The Facebook IPO saga could be far from over. Facebook’s shares slipped to $30.98 in early trading on Tuesday, eventually recovering to $34, but at press time the trend is negative, albeit on relatively low volumes.

The US Securities and Exchange Commission also stepped in, urging a review of the IPO. This apparently only served to deepen misgivings and the market is reacting. Facebook already shed about $15 billion in market capitalization over the $38-per-share price, backed by underwriters.

However, even the underwriters seem to be slowly backing down and it has emerged that the lead underwriter at Morgan Stanley reduced his revenue forecast days before the IPO. Goldman Sachs and JPMorgan Chase also revised their estimates.

Meanwhile the rollercoaster ride is continuing, and it is looking red at the moment. Facebook is currently trading at $31.5, or 7.34 percent down and it is not easy to say which way it will go next. There is a chance that we could see it rebound to $34 or $35, but then again it could drop below $30, or linger in the $31 to $32 range. At this point, I would bet on the latter.

Good thing I listened to Nick Farrell and invested in Apple instead. On a more serious note, there is no doubt quite a few small investors, dazzled by the hype and overly optimistic punters on cable TV, will end up with a bloody nose.

Last modified on Tuesday, 22 May 2012 22:12

Peter Scott

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