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Facebook tumbles on negative comments

AFP  New York, September 25, 2012
First Published: 08:55 IST(25/9/2012) | Last Updated: 09:00 IST(25/9/2012)

Facebook shares plunged after Barron's, the influential markets-focused newspaper and website, said the stock was still sharply overvalued and were possibly only worth USD 15.

The shares slumped 9.06% to end the day at USD 20.79, after dipping as low as USD 20.36.

The fall came after Barron's published a story saying the world's largest online social networking company was still over-priced despite a drop of nearly half since its public offering four months ago.

"Facebook's 40% plunge from its initial public offering price of USD 38 in May has millions of investors asking a single question: Is the stock a buy?" Barron's said.

"The short answer is "No."

"What are the shares worth?  Perhaps only USD 15," Barron's said, adding that even at that level they are "no bargain."

The shares are still above their post-IPO low of USD 17.55. But analysts have warned that on October 29 a huge new supply of shares from company employees, up to now prohibited from selling their holdings, could flood the market, putting more downward pressure on the price.

Addressing the IPO flop for the first time, on September 11 Facebook founder Mark Zuckerberg said: "The performance of the stock has obviously been disappointing and we care about our shareholders."

However, he assured that over time, "we're going to be making more money on mobile than we make on desktop."

But Barron's argued that the company was behind on addressing the challenge of getting advertising revenue from people using Facebook on their smartphones.

Moreover, it said, even at USD 15, the company would trade at a price-earnings multiple of 24 times expected 2013 earnings.

By comparison, two other tech giants, Apple and Google, trade at roughly 16 times this year's earnings.

But as Facebook sank yesterday, Google shares rose more than 2.1% to a record high of just under USD 750 a share.

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