May 22nd, 2012
Facebook share prices hit a low today of $30.98, 18% lower from the $38 IPO on Friday and 8.9% lower than Monday. Shortly after trading started on Friday, the stock had risen to a high of $45 but has been mostly on the decline since.
Nothing has changed at Facebook since the IPO to substantiate the decline, although just days before the offering, underwriter Morgan Stanley drastically cut Facebook’s revenue forecasts. The general speculation is that Facebook was drastically overvalued. Even at its Monday closing price of $34.04, the market implies a 24% annual growth rate for earnings over the next 10 years, which would rank above 90 percent of the companies in that industry.
An interesting twist on the story – Digital Music News reported on how the Facebook share decline will likely affect Spotify’s valuation.