Following another painful trading day Monday, Facebook’s stock continues to trade below the $20 mark in Tuesday trading. The social media company hit a new all-time low of $18.75 in Monday trading — half of the company’s original share price of $38 in May.
Facebook’s weak stock performance has reportedly taken a bite out of the value of its proposed Instagram acquisition, which still needs the approval of U.S. regulators. Valued at about $1 billion when it was announced in April, the New York Times’ Dealbook reports that the deal now carries a value of about $735 million because it included some 23 million shares of Facebook stock. At the time, Facebook shares were valued at $30 per share.
Of course, Facebook shares have been suffering for months, but the slide deepened last week after early investors got their first chance to sell stock in the company. As the Associated Press reported, Securities and Exchange Commission filings show that one of the company’s earliest and most prominent investors — Peter Thiel — sold around 20 million Facebook shares both on the day the lock-up expired, Aug. 16, and on the following day.
Thiel reportedly sold his shares for a total of about $396 million, based on Facebook share prices on those days.
The plotline around Facebook has changed dramatically since the company filed to go public. That change was underscored by a Tuesday article in the New York Times that points out the conflict between the company’s ambitions and Wall Street expectations.
Part of that conflict, the article notes, is that the company and its chief executive Mark Zuckerberg, have made it clear that the focus is to keep developing products, not necessarily to generate revenue.
That shouldn’t be a surprise to anyone who was paying attention when the company first filed its paperwork to go public. In his letter to investors, Zuckerberg said, “Simply put: we don’t build services to make money; we make money to build better services.”
Talk like that is hardly music to investors’ ears, and has prompted questions about whether Zuckerberg is the right person to helm a public company. A report from the Los Angeles Times questioned whether the 28-year-old executive was “in over his hoodie” and should cede the job of building rapport with investors to other executives within the company to focus on the creative side of Facebook’s development.
Despite all of the hand-wringing over the company’s stock slide, analysts are still upbeat about Facebook in the long run, saying that it just needs time to prove itself.
Sterne Agee analyst Arvind Bhatia lowered his estimates on Facebook in late July, but said that he still expects that the company is a great long-term opportunity.
“[We] think FB’s market opportunity remains large and the stock should be a core holding in tech portfolios with a long-term horizon,” wrote Bhatia, who nevertheless lowered his price target for the company to $37 from $46, due to a slowdown in the company’s payments revenue.
According to NASDAQ summary of analyst sentiment, 13 of 27 firms had a “strong buy” rating on the stock, two were advising a buy, and only one suggested that investors sell. Eleven analysts are advising that investors hold onto their shares with a “hold” rating.
(Post Co. Chairman and Chief Executive Donald E. Graham is a member of Facebook’s board of directors.)