Thursday, 24 May 2012

Facebook roller coaster!

Facebook @ $32.00, +$1.00 (+3.23%)

"There is only one thing worse than being talked about and that is NOT being talked about." Oscar Wilde.

Well I don't plan on writing about Facebook all the time but it seems a bit more interesting than trying to make sense of "Summit XVIII..., the Eurocrat strikes back".
Bizarrely the social network appears to have become the anti-social network as the capitalists became involved. 
Nothing like a good old pumping of the share price at the expense of the faithful to make a few worthwhile gains from an IPO is there.
But it now looks to have left a sour taste in the mouths of some shareholders with a view that not all information may have been fully disclosed to all shareholders prior to completing the flotation. 

 "Leading analysts branded Facebook’s stockmarket debut a “fiasco” yesterday as investors lodged lawsuits claiming they had not been told of problems with the business before the float. Shareholders began legal action in New York and California against the social network, its chief executive Mark Zuckerberg, Morgan Stanley, the lead underwriters to the float, and other banks involved.They allege that insiders to the initial public offering (IPO) of shares did not make some investors aware of a potential fall in the company’s revenues days before the share sale, resulting in substantial losses. Two of America’s financial regulators have also said they are considering investigating issues surrounding the IPO. This could lead to Morgan Stanley being investigated for alleged securities fraud, according to The Times. "

This accusation of "selective disclosure" of information relates to a forecast drop in Facebook revenues that now looks to be the basis of a suit against the 6 major banks involved with the IPO, along with founder Mark Zuckerberg, Facebook itself, and its CFO, David Ebersman.

Following this information, and post IPO, the subsequent revenue downgrades by the 6 banks have potentially contributed to the shares subsequent fall from their debutante price of $38 (peaking at $45), to a trough of $31 prior, to yesterday's stumble back to $32.
The 3% revenue downgrade to $3.07bn (from $3.16bn), doesn't seem huge but presses sufficiently on the nerve of doubt that Facebook might not be able to leverage its huge user base and might yet be susceptible to the next "shift" to mobile platforms.
In turn this has triggered a 16% fall from the auction price ($32/$38), or 29% from its peak ($32/$45), which, if the company wasn't an IPO (i.e it had been trading on markets long enough to establish a historic price range), would suggest a significant profits warning had been announced.

Wall St never sleeps!

Related articles:
- Facebook status - losing £15.4m a minute

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