Facebook shares hit new low, trading as low as $26
NEW YORK (CNNMoney) — The slide in Facebook shares continued Thursday, May 31st, taking the share price below the lowest value set by the company as it planned its initial public offering.
Shares of Facebook lost $1.12, or 4%, to $27.07 in midday trading Thursday. It traded as low as $26.83
The company’s IPO filing back in February said its own valuation of its stock put its value as of Dec. 31 at $29.73 a share. Then on May 3, when it gave its first offering price estimate, it said it expected the company’s 2.1 billion shares to be worth between $28 and $35 at the time of the IPO.
It eventually raised its price range to between $34 and $38 a share, and then took the company public at the top end of that range.
But after opening the first day of trading at $42, and seeing prices rise as high as $45 on record volume for an IPO, shares have been in a near steady slide since. They closed the first day just barely above the IPO price and lost 18% of their value over the next two trading days.
With the latest losses, Facebook shares are now down about 29% from the IPO price.
There was no significant news about Facebook on Thursday driving the prices lower. Analyst Laura Martin of Needham & Co. said she believes the latest share decline is due to lingering investor concern about reports that Facebook plans to invest in developing its own smart phone and might buy a company to try to enter that sector and deal with its perceived “mobile problems.”
“One thing Facebook management is going to have to get used to is that every decision they make is going to be judged every day in the markets,” said Martin. “The creation of a smart phone is something that the markets are telling them is value destructive.”
Still, Martin said she’s maintaining her $40 price target on the stock, as well as her “buy” recommendation, and doesn’t intend to change either due to the stock price slide. She might make a change if an acquisition is announced though.
Some people questioned whether Facebook was ever worth anywhere near the IPO price. While the company is profitable, the $107 billion market value based on that offering price was more than 100 times its most recent full-year earnings, making it far pricier than most other stocks.
With the latest slide, the company’s market value now stands about $60 billion, still a very pricey 60 times earnings.
The latest decline was enough to lead business news wire Bloomberg to cut Facebook founder Mark Zuckerberg from the list of the world’s 40 richest people. His Facebook holdings have fallen in value from $19.3 billion at the end of his first day of trading, to $13.6 billion as of Thursday.