May 22, 2012 - FILED UNDER Collaboration
RE: Facebook’s Stock Dip — Keep Calm and Carry On
Four days into Facebook’s IPO and the stock price has slipped from $38 to $31. To the surprise of exactly no one, the press is having a [expletive] field day.
A figurative finger is being pointed at Lord Zuck, the underwriters, even Nasdaq itself. Some headlines even question whether or not Facebook is on its way down the tubes.
But if we’re being really for real realistic — which, c’mon, why not — bracing ourselves for the so-called downfall of a network upwards of 800 million people, less than 100 hours after its public debut, is silly. Aside from the fact that almost nothing lives up to the level of hype surrounding this move, an IPO is a long term proposition. Making such drastic calls at this point? Green.
If you’re in need of a little relief, CBS listed a combination of reasons why we might not be seeing the payout we’d hoped for. From that list:
- Its IPO occurred the same week that the markets posted their worse performance so far in 2012. The Standard & Poor’s 500 index fell 4 percent.
- People have yanked over $400 billion from U.S. stock mutual funds since 2008.
- Banks are being cautious. “Regulators want banks to take less risk,” said Larry Tabb, founder and CEO of Tabb Group, a markets research firm. “To support a $100 billion offering can be challenging in this environment.”
- Investors were spooked by the trading glitches at the Nasdaq stock market on Friday. Some people weren’t sure if their trades had been executed and trading of the stock was delayed by a half hour.
Seat Belts, Please
This isn’t to say that Facebook won’t ever crash and burn, or that it won’t suffer the same fate of many consumer IPOs before it (check out an infographic we did with JESS3, comparing consumer and enterprise IPOs here). As we’ve noted before, nobody is exempt from a sudden nosedive. But with challenges like meeting growth targets, monetizing its user base and generating revenue in store, the network is in for a much bumpier ride than we’ve experienced since last Friday. Best not to get hung up on these initial dips.