In its third day of public trading, Facebook’s stock continued to stumble. Hayley Tsukayama reports:
The market didn’t get any rosier for Facebook on Tuesday, as shares spiraled to their lowest level since the social network went public at the end of last week. On the company’s third day of trading, shares closed at $31 , or 8.5 percent off of their opening bell price.
Minutes before closing bell, Reuters reported that the social network had settled a lawsuit in federal court in San Jose, Calif., over its “sponsored stories” feature. According to the report, plaintiffs alleged that the feature had publicized users’ “likes” without offering “compensation or the ability to opt out.” The terms of the deal were not listed in court filings, according to Reuters.
Facebook declined to comment on the case.
Meanwhile, the banks handling Facebook’s initial public offering are under scrutiny after a separate Reuters report said Tuesday that an independent analysts at Morgan Stanley, as well as JPMorgan, had scaled back their forecasts for Facebook revenue ahead of the offering.
Meanwhile, the Nasdaq aimed to save face after problems at the exchange marred the IPO. Hayley Tsukayama reports:
Meanwhile, Nasdaq worked to address the glitches that delayed Facebook’s initial offering on Friday. In a call to shareholders on Tuesday, Nasdaq chief executive officer Robert Greifeld said there had been clear “mistakes in the Facebook listing” but reaffirmed that Nasdaq is “sound,” according to a report from the Wall Street Journal.
The report said that the call lasted about 30 minutes — shorter, the Journal noted, than the delays the IPO faced — and that Greifeld took no questions.
Some analysts suggest that the stock’s slide could have an unexpected toll. The Associated Press reports:
California’s budget could take a hit if Facebook’s stock price keeps sliding.
Gov. Jerry Brown previously estimated the state would generate between $1.4 billion and $1.9 billion over the next 13 months from taxes related to sales of Facebook stock. The estimate was based on a price of $35 a share.
Facebook went public Friday at $38 a share but closed at $31 on Tuesday.
Last week, the nonpartisan Legislative Analyst’s Office warned that a number of uncertainties could cause the state’s deficit to be several billion dollars higher or lower than the governor’s $15.7 billion estimate.
“The potential hit from Facebook’s share price is nothing compared to the potential damage from a broader stock slump,” Deputy Legislative Analyst Jason Sisney said.
The budget analyst pegged tax revenue from Facebook stock sales between $1.6 billion and $2.1 billion through mid-2013. The higher estimate is dependent on whether voters pass Brown’s tax initiative in November.
The Legislative Analyst’s Office used Facebook’s IPO price of $38 a share and projected it to grow to $45 after six months.
Brown’s finance spokesman H.D. Palmer said it’s too early to tell how much the sagging stock price will impact state taxes given that Facebook has only been trading for three days.
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