Commentary

Another Slapdown for Facebook's Stock

What was that about the triumph of new media over old? After a dismal IPO and post-IPO decline, Facebook’s stock finally seemed to be getting its mojo back -- when business magazine Barron’s slapped it back down into the gutter in rather brutal fashion with an article titled “Still Too Pricey.”

Facebook’s stock had been trading around $22 last week, but that is too rich according to Barron’s contributor Andrew Bary, who posed himself some rhetorical questions: “Is the stock a buy? The short answer is ‘No.’” And in case you’re wondering, “What are the shares worth? Perhaps only $15.”

Ouch. Following the publication of the article, on Monday Facebook’ stock price fell $2.07 to $20.79, a 9% drop. The slide was steep enough to trigger a “short sale circuit breaker,” which is designed to protect stocks against manipulation by short sellers.

advertisement

advertisement

Of course Bary had some arguments to back up his harsh verdict. He notes that the “rapid shift in Facebook's user base to mobile platforms… appears to have caught the company by surprise” -- and because of the size limitations of mobile screens, “Success in mobile is no sure thing.” And the shift to mobile may hand more power to Apple and Google, at least one of which (you have one guess) is not exactly friendly to Facebook.

Add to all this the fact that Facebook is trading at a valuation roughly twice that of Google, a much more established business, and as Bary concludes, you have plenty of reasons to be skeptical about Facebook’s current price.

1 comment about "Another Slapdown for Facebook's Stock".
Check to receive email when comments are posted.
  1. Timmy John from Self Employed, September 25, 2012 at 10:20 p.m.

    I think these IPOs are better suited with VCs instead of the investment banks, I mean if you take FB for example, all their problems started because either FB or ML increased the float right before the IPO, not saying they aren't over priced but the stock fall started before that http://twitter.com/lefkofsky

Next story loading loading..