After one of the most highly anticipated and watched IPO’s in recent memory, Facebook’s stock fell to $19 per share on August 17th, just below half of its initial offering price of $38. The stock has struggled since the mid-May offering, leaving shareholders feeling like they just got out of a boxing ring. The question is what happened?
This drop in price is partly due to the expiration of a share lock-up. A share lock-up is set by the underwriters to prevent insider trading from early investors. With that lock-up released last week, those investors could now sell their shares, creating the decline in price. There are additional investors who have shares locked-up until expirations later this year. This makes us wonder if shares will continue to be driven south? Although these dates have been public for months, this could still cause further investor speculation.
Numerous concerns about the company are still relevant since the announcement months ago that the company would go public. Many still question if Mark Zuckerburg is cut out for the job of CEO, or if it is time for a more experienced executive to step in. Others argue that the management of the company is fine, but the problem is too many shares were issued and flooded the market. Others argue that the valuation was entirely too high.
Furthermore, Facebook’s main source of revenue is through selling advertisements on their website. But, with social media moving towards mobile devices, many people access Facebook through their mobile app, which doesn’t currently feature advertisements. Zuckerburg has not yet announced if they will begin to charge for the mobile app, or begin to include advertisements within the app. Announcing a solution to this problem could give the company and their disappointed shareholders a much needed boost.
The public is anxious to see how Mark Zuckerburg will navigate the company through the current slump. He has the opportunity to prove himself as a leader by developing a business model that monetizes the nearly billion users on Facebook. He also has the ability to slip into oblivion and disappear into the landscape. We hope that he will be able to find a away to increase revenue figures and prevent shareholders from cashing out….but only time will tell.
Securities and investment advice offered through Transamerica Financial Advisors, Inc. (TFA). A Registered Broker/Dealer and Investment Advisor Member FINRA & SIPC. Non-security products and services or tax services are not offered through Transamerica Financial Advisors, Inc. Wealth Management Associates is not affiliated with TFA. LD0445518-8/12