"People are disillusioned," said Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. He doesn’t own shares of Facebook. "A lot of investors believed the hype," he said. "In this type of volatile market environment, people are not going to take chances."
Facebook shares climbed as high as $45 on May 18, when the shares ended the day with a price-earnings ratio of 83.1, making the Menlo Park, Calif.-based company more expensive than 99 percent of Standard & Poor’s 500 Index stocks.
The IPO, which set a record for technology companies by raising more than $16 billion — a figure that valued the company at $104 billion — produced the worst five-day return among the 10 largest U.S. deals of the last decade. The 13 percent loss through Thursday exceeded the 10 percent drop by MF Global Holdings Inc. in its first five sessions in 2007.
The Tuesday closing share price valued Facebook at $79 billion.
Facebook and Morgan Stanley, its lead underwriter, faced criticism for boosting the number of shares sold in the IPO by 25 percent to 421.2 million in the days before the deal. They also increased the asking price to $34 to $38 from $28 to $35.
The first day of trading was disrupted by the "poor design" of Nasdaq OMX’s software for IPO auctions, Robert Greifeld, the chief executive officer of the exchange operator, said May 20. The malfunction also prevented Nasdaq OMX from sending messages to brokerages confirming that clients’ orders had gone through.
"Investors are incorporating the risks embedded in the stock," Brian Wieser, a senior analyst at Pivotal Research Group L.L.C., said Tuesday. He has a sell rating on the stock and a $30 share-price estimate. "A lot of people are trying to trade the stock on the basis of those expectations. Options will be a very robust marketplace with respect to Facebook."
Wedbush analyst Michael Pachter said that Facebook’s stock has been hurt by what he called "near-term issues" that include the Nasdaq glitches, an oversupply of stock that was being offered, and the allegations of selective information disclosure.
But he rates the stock "Outperform" and has a 12-month target price of $44.
"Facebook has built a huge moat between it and its competitors, and we endorse Mr. Zuckerberg’s mission," he wrote in a note to investors Tuesday, referring to Facebook CEO and founder Mark Zuckerberg.
This article contains information from the Associated Press.