He’s barely 28, the protagonist of a book ("The Accidental Billionaires") and an Oscar-winning movie ("The Social Network"), the CEO of a conglomerate gone newly public whose product is winning converts by the hundreds of millions the world over. One might think the life of Mark Zuckerberg would be eventful enough (he also got married this month) for several lifetimes.
One would be wrong.
The events of the last few days surrounding the super-hyped Initial Public Offering of Facebook (Nasdaq: FB) have been dramatic enough to rival several Russian novels. And given how recent all this news went down, it would seem a lead-pipe cinch we have not heard the last of this story.
It is inevitable that an IPO of this magnitude could not possibly live up to all the international fanfare the Facebook launch garnered on May 18. But now it appears all sorts of things went wrong in all the excitement before and shortly after the IPO. The stock debuted at $38 U.S. and went as high as $45 the same day before scaling noticeably back. The following Friday, shares were trading at $31.73 U.S., nearly 17% below the IPO price and 30% below that day's high.
It seems too many factors are weighing on the stock to spook investors away from trading the issue any higher. Far from all investors playing on a level playing field, three Facebook investors have alleged in a lawsuit against Morgan Stanley as well as other underwriting banks and Zuckerberg himself, lowered Facebook's revenue estimates just prior to the IPO. The suit also alleges only some lucky investors were informed of the change in outlook.
As a separate Reuters report noted, Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America reduced their earnings outlooks for Facebook to strikingly similar levels ahead of the IPO.
As a result, the U.S. Securities and Exchange Commission and the Commodities Futures Trading Commission, among other regulators, have said this week they will look into Facebook trading, to make sure everything is being done according to the rules.
Some stock watchers have suggested the latest fiasco is an example of what the retail stock market needs least, as it tries to recover from the 2008-recession lows. There have been other such incidents to drive markets down and rattle investor confidence.
The Standard & Poor’s 500 Index has reportedly made no progress in more than a decade, currently trading at levels first seen in 1999 following two bear markets that wiped out about 50% from the index. The May 6, 2010, rout known as the "flash crash" erased $862 billion U.S. in less than 20 minutes, undermining confidence in the structure of equity markets.
Facebook stock was trading late Friday afternoon at $31.28 U.S., off $1.77, or 5.3%, from Thursday’s close.
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