The ominous downward trend in Facebook’s stock price visible on Friday continued on Monday with a substantial decline below its IPO price of $38. At the time of writing, Facebook shares were trading at $33.65, down 11.5% from the IPO price and 25% from its Friday high of $45. That works out to about $12 billion in lost market capitalization from the IPO price, and $30 billion from the Friday high.
In retrospect, it seems clear that Facebook shares remained above $38 at the close of trading on Friday only through the intervention of underwriters including Morgan Stanley, which stepped in to buy shares and buoy the price as a “stabilization agent” repeatedly during the day. One question now is whether Morgan Stanley will continue this policy on subsequent days; the stock’s performance so far on Monday suggests it will not.
This, in turn, calls into question some of the more generous judgments about Facebook’s IPO last week -- for example the view that price stability on Friday meant the company had priced its IPO correctly. Without the benefit of a stabilization agent, it would appear the market disagrees with that judgment to the tune of at least 10%.
Meanwhile Facebook is also dragging down other social media stocks. Zynga, the social game company whose fortunes have been closely tied to Facebook’s, saw its stock price slump 19% from just north of $8.80 on Wednesday of last week to $7.15 today. Likewise Yelp, the online listings and review platform, slumped 11% from $21.60 last Wednesday to $19.33 today.
The Facebook slump was felt even by companies with no explicit connection with Facebook. Professional network LinkedIn slumped from about $113 in the middle of last week to $100.24 today, although it appears to be rebounding somewhat.