Facebook’s Flop Is Death Knell for Bull Market
By: Rick Ackerman
Wednesday, 23 May 2012
Observing Facebook’s price action on its IPO day earlier this week, one might have thought that fear, greed and stupidity had taken the day off. How could the over-hyped, socko-boffo stock of the year – of the decade – have failed to double within minutes of the opening bell? In fact, pumped to a $38 initial-offering price, FB shares achieved only a pathetic $45 on the opening bar before detumescing back to $38 by day’s end. Even more dispiriting to those on the retail end of Thursday’s relatively unfrenzied buying was that, on day two, the stock collapsed to $33 in the early minutes of the session, there to languish for six grueling, armpit-staining hours. Retail suckers…er, buyers were bound to have been disappointed, and some, more than a little churlish about it, labeled the IPO a flop. Had the guys on Sand Hill road and their sleazy confederates on the Wall Street Midway simply overpriced the stock, as some suggested? Or was GM perhaps to blame for pulling its advertising from Facebook days before the Big Event because of poor results? Some observers even speculated that investors had finally wised up to the fact that companies with relatively modest revenues deserve relatively modest earnings multiples.