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Facebook stock slide puts new pressures on company

Facebook Inc’s underwhelming debut on Wall Street increases the pressure on the social networking giant to deliver stellar growth – a novel situation for Chief Executive Mark Zuckerberg, who has been clear he is more interested in building products than making money.

Facebook shares fell 11 percent on Monday, the company’s second day as a publicly traded company, due to what many analysts and investors blamed on overly aggressive pricing by Facebook’s underwriters, as well as a decision to expand the size of the offering by 25 percent.

The poor stock market performance has intensified the scrutiny of Facebook’s business, raising the bar for the company to regain Wall Street’s confidence, say some investors and analysts.

“What’s most important now to investors is top line growth,” said Michael Binger, a senior portfolio manager at Gradient Investments. “If they’re interested in seeing their stock work, they need to have a good quarter,” he said, referring to Facebook.

Falling below the offering price is damaging to investor “psyche” noted Binger, who has personally bought some shares in Facebook but whose firm does not have a position.

“People who usually would be buying are now going ‘Something is seriously going wrong here.’ Emotions and skepticism take over,” he said.

Facebook generated $3.7 billion in revenue in 2011, with net income of $1 billion – a sharp contrast to some of the money-losing Web companies such as Groupon Inc and Pandora Media Inc, that have recently gone public.  Read More

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A Revolution in Social Networking

Posted on May 21, 2012, in #social media and tagged , , , , , . Bookmark the permalink. Leave a comment.

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