Facebook Slides Again

Shares of Facebook FB -3.17% continued to slide amid a Reuters report that an analyst for one of its banks had trimmed his outlook for the social-network company's revenue just ahead of the deal.

The stock changed hands at $32.02 in early trade, off its low of $31.51 but still down $2.01, or 5.9%, on the day. Shares had tumbled 11% Monday and are now down 16% from the the initial public offering price of $38.

 

The news "zipper" headline about Facebook stock's decline, in New York's Times Square on Monday.

The action by the Morgan Stanley MS +5.27% analyst, which Reuters said was relayed to some of the bank's major clients as meetings for the IPO were held, came as a surprise to many potential investors so close to the stock's debut. It said the cut came after Facebook released an updated prospectus ahead of the share sale that cautioned about revenue-growth challenges presented by a shift to mobile devices.
Underwriters J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. also revised their estimates, according to the report.
Spokespeople for Morgan Stanley and Goldman Sachs declined to comment immediately on the matter. A J.P. Morgan spokeswoman wasn't available to comment.
Investment-bank analysts are supposed to be independent from the side of the bank that underwrites IPOs, a rule that would bar Morgan Stanley from swaying its analyst's commentary. At the same time, underwriters are prohibited from publicizing their sell-side analysis so soon after the offering.
Analysts from other firms this week also drew attention to risks posed by Facebook's slowing revenue growth and less-profitable mobile business.
Monday's selloff came partly because some investors who were allotted more shares than they had expected pared their holdings. The stock fell to $33 in early trading before paring the loss to end at $34.03.
The shares debuted Friday in a day marred by technology problems that affected trading in millions of shares and ended that day up just 23 cents.
Nasdaq OMX Group Inc. Chief Executive Bob Greifeld, in remarks at the company's annual meeting Tuesday, acknowledged "mistakes were made" with the debut of Facebook.
A lengthy delay before the stock opened involved millions of shares worth of trading going unconfirmed and brokers were left in the dark for hours before they knew the status of their trading in the eagerly anticipated stock.
Mr. Greifeld reminded investors that Facebook's IPO was the largest ever in terms of valuation at the time of the offering, and the initial trade in the stock was the biggest Nasdaq OMX had ever handled.

Credit : Wall Street Journal