Facebook ended Tuesday, its third day of trading at $31 per share — $7 less than where it launched on Friday.
It is becoming obvious that those early explanations of Facebook's middling performance on Friday–it was NASDAQ's glitchy system's fault, it was those high-frequency traders, and best of all, the stock deliberately priced just right so there would be no first day pop—just aren't relevant.
Clearly, investors don't like Facebook, at least not at this particular price.
But what price would they prefer? Trip Chowdhry, managing director of Equity Research at Global Equities Research, thinks between $15 per share to $18 per share would be a fair valuation. Twenty dollars per share has been tossed about as well.
Another questions investors have been asking themselves is what trajectory the stock will follow (yes, now we know—down—but how quickly?)
Amazon's Fall from Grace
One theory is that Facebook's stock will drop in the near term, maybe even by half as Chowdhry thinks it should — but eventually will claw its way back to $38 per share and then beyond.
That is what happened to Amazon when it went public. It quickly hit $100 per share and then dropped, hovering at subterranean levels for years before working its way back up beyond the $100 price point. Today it is a $200 plus per share stock. That, at least is the theory of Rob Steinberg, co-chair of the Mergers and Acquisitions Group at Jeffer Mangels Butler & Mitchell LLP.
A Disappointment, Then (Some) Redemption
Or possibly it will follow the path of a more recent tech offering, Groupon.
Before its road show the daily deal company could do no wrong. As it made its way to its IPO, though, multiple flaws about its business model emerged – to say nothing of some of its accounting practices. It didn't take long for investors to become disillusioned, although the company pleasantly surprised shareholders with its more recent earnings.
Just Like Netscape
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