Tuesday, May 22, 2012

Facebook fizzer? Shares close underwater as investors unfriend The Social Network

Facebook has only been trading on Wall Street for two days, but already investors appear to have hit the "unfriend" button.

Shares in the social networking company have closed well below the issue price of US$38 amid concerns that Facebook might initially struggle to make much money.

Facebook shares sank as much as 14 percent at one point to US$33 before closing a little better at US$34.03.

Here's my analysis from this morning's edition of AM.

Unfriended: Facebook shares over first two trading days

So it is too early to say the Facebook float is more sizzle than sausage? Probably.

However, some commentators had been talking up a "stag" listing for Facebook, fuelling expectations that technology company surges last seen in the dotcom boom might return.

The reality was that Facebook's underwriters had to step in a buy on when trading opened on day one to keep shares above the US$38 listing price.

Today's selling wiped an estimated US$19 billion off Facebook's market value, leaving red faces on Wall Street and retail investors with burnt fingers.

The challenge now is to promote Facebook's long term value and attraction to advertisers as the dreaded "monetise" word takes on a new meaning for social networking.

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