Will Facebook Stock Price Ever Rise Above it’s IPO?
One of the most anticipated IPO’s in the history of the Internet is rapidly failing, as Facebook continues to suffer from a lackluster opening day on May 18, 2012. Facebook’s stock price plunged to a new low last Thursday. For the first time, it dipped below $20, almost half of Facebook IPO’s price. This huge loss in a short amount of time is a major blow to other Internet companies that may want to go public in the near future.
Facebook stock price closed at $19.05 on Friday, which is well below the Facebook IPO price of $38. In fact, since the IPO, Facebook’s founder and CEO, Mark Zuckerberg, has watched as his fortune went from around $20 billion to $10 billion in just a few months. While Zuckerberg admits the drop is “painful” to watch, he still remains optimistic for the future of the company as they learn how to operate as a public company.
There are many different reasons for the dramatic drop in price for one of the hottest Internet stocks ever. One reason for the decline is that investors are extremely cautious on the sales growth numbers that have been reported. Before the IPO, they reported sales growth of 32 percent in the second quarter, which was down from 45 percent and 55 percent in the first and fourth quarters, respectively.
Another reason for the price dropping even lower is that restrictions for insiders to sell their stocks have been released, meaning there was about a 60 percent increase in the amount of stocks that are available in the market. It all comes back to the law of supply and demand. There are a lot more shares that are available to purchase, but the number of willing buyers at a higher price is not there to match the demand. Therefore, the price naturally drops to a point where the consumers are willing to pay for it.
While the Facebook IPO price ended the first day of trading above the initial price, it has been in a steady decline since then. Many experts feel they need to learn to adapt to being a public company, which means they need to make more profit out of their site then they currently are. One major area of concern that they need to address is the amount of users accessing Facebook on their mobile devices. When people use a mobile device, ads are not getting served to them as frequently as PC users. So, despite the number of users hitting record highs, the amount of ads that are being served are down 2 percent.
Once Facebook solves these problems, this price may seem like a steal. Many experts believe that the site will bounce back and the Facebook stock price will rise much higher then their IPO price. Zuckerberg is certainly mortgaging his future on the success of the company, and despite what some critics think, he will not step down as CEO. Whatever happens, social sites such as Facebook are not going away any time soon, so as long as they continue to innovate, they should remain as the market leader.