May 2012, Week 5


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Tue, 29 May 2012 21:24:25 -0400
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Facebook Shares Fall Below $30 as US Authorities Begin
Investigation Into IPO

     Shares continue to slump on Wall Street as lawsuits
     against founder Mark Zuckerberg allege company
     misled investors

Dominic Rushe in New York
May 29, 2012

Facebook's shares dipped below $30 Tuesday as the
company's shares hit new lows and continued to struggle
in the wake of its massive initial public offering

Even as US stock markets bounced back from falls last
week, Facebook's shares slumped 9.62% to end the day at
$28.84 - almost $10 below the $38 price set at their IPO
earlier this month. Stock markets in the US, which had
been closed on Monday for Memorial Day, ended up for the

The share slide means Facebook is now valued at
$61.98bn, a sharp fall from the $104bn it was valued at
when the company went public on 18 May.

The IPO has proved a disaster for Facebook and its
bankers. US authorities are investigating allegations
that the company gave critical information to some
investors and not others. Shareholders have launched
class action lawsuits against founder Mark Zuckerberg,
the company and its bankers, including lead bank Morgan

Walter Zimmermann, senior technical analyst at United-
ICAP, said there was plenty of evidence that the stock
could fall further. He said the share sale had
represented "a mania of historic proportions".

"This was an IPO that was going to save California and
uplift the western world. It was so overhyped and
overvalued that it could only fall," he said.

Some traders pointed to technical reasons for the
stock's continuing woes. Trading in Facebook options -
contracts that allow investors to make bets on the
direction of a company's shares - started Tuesday.
Traders can now also "short" Facebook shares, betting
that the price will fall.

Sam Hamadeh, founder of analyst PrivCo, said most of the
options were "bearish" meaning traders were betting on
price falls and that popular contracts were putting
Facebook's share price in the mid $20s for June and
July. PrivCo estimated Facebook's shares were worth $25
ahead of the IPO.

"The shares would have probably fallen anyway but this
probably sped the process up a little bit," he said.

Zimmerman said discussions of technical issues missed a
wider point. He said Facebook had sold so many shares -
96m - that there was little appetite from investors who
had not bought shares. "Who is left to buy?" he said.

News that the company is considering building its own
mobile device, an area where it has struggled to make
money, seems to have been shrugged off by investors.

Last week law firm Robbins Geller launched a class
action lawsuit on behalf of Facebook investors against
the company and its bankers. Massachusetts' secretary of
commonwealth William Galvin has sent a subpoena to
Morgan Stanley demanding more details of what the bank
and Facebook executives told select investors ahead of
the IPO.


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