Facebook stock's slide continued Monday, leaving some investors wondering about the outlook for the newly-public social network.
Facebook's stock tumbled below its $38 IPO price on its second day of trading. By Monday afternoon the company’s share price was down 10 percent from Friday’s closing price of $38.23. (You can track the performance of Facebook’s stock price here.)
When a stock falls below its offer price so soon after an IPO it is considered a disappointment for the company, particularly when the IPO is the most heavily traded ever and concerns such a high profile company.
A number of reasons for the stock decline were offered by observers. Some pointed to underwriters offering too many shares, while others blamed an overly strong IPO price and worries about slowing revenue growth at the social network.
Investors and technology industry watchers are closely tracking the Menlo Park, Calif.-based company's shares. Facebook's initial public stock offering was one of the most anticipated ever, and now serves as a bellwether for other social media companies.
“There must have been some sober second thoughts about this,” said Brian Wieser, an analyst at Pivotal Research Group who was first to come out with a “sell” rating on Facebook's stock on Friday.
Daniel Ernst, principal at Hudson Square Research, said he still thinks Facebook is “a fantastic company.”
“Fifty-three percent operating margins, 901 million users around the world … they can provide detailed targeting to advertisers,” he told CNBC, noting that many investors want to own Facebook’s stock, but for some the stock’s multiple -- a method for valuing companies and their stocks -- is too high.
“I really think we are in inning one of Facebook growth,” he said. “I really think Facebook has something; for me, it’s just a question of price.”
Related: Facebook drops below $38 IPO price
Facebook’s market debut Friday suffered some hiccups.
Trading on the Nasdaq was delayed for a half hour due to issues with traders' orders. The stock closed Friday just a few cents above where it priced Thursday night. Although many investors had hoped for a big first-day pop, Facebook's stock opened Friday at $42.05 and fluctuated between $45 and $38 throughout the day before closing at $38.23.
The chief executive of the Nasdaq stock market admitted Sunday that technical issues had tarnished Facebook’s debut as a public company, but Bob Greifeld argued that the technical glitches had not had an impact on the performance of Facebook’s shares.
Thomas M. Joyce, chairman and chief executive officer of trading firm Knight Capital Group, appeared on CNBC Monday to dissect Facebook’s first-day IPO flop Friday, and he laid the blame at Nasdaq’s door.
“This is arguably the worst performance by an exchange on an IPO -- ever,” Joyce said, noting that it was not “a systemic issue … the failure was Nasdaq’s.” Joyce said Friday’s lackluster performance of Facebook’s stock had nothing to do with the company’s fundamentals.
“This was simply a technology problem,” he said. “This was like your server going down, except on a massive scale. And instead of stepping back and rebooting, they kept plowing ahead.”
Wedbush analyst Michael Pachter, who came out with an "Outperform" rating on Facebook before its IPO, said he thinks the investment banks that arranged the offering overestimated demand for the company’s stock.
Last week, the bankers, led by Morgan Stanley, increased the offering price range. On Wednesday, Facebook's early investors and other stockholders increased the number of shares they planned to sell in the IPO. Both moves appeared to signal strong demand for the shares.
Related: Nasdaq ‘embarrassed’ about Facebook delay
“The late addition of 84 million shares to the offering overwhelmed demand, limiting the first day price,” Pachter said in a note to investors.
Deutsche Bank’s Brad Miller, an expert on pricing IPOs, notes that Facebook's IPO trading glitch at the Nasdaq was due in part to the fact that it would have been difficult to find a comparable company, or a competitor, to use when valuing the company.
It’s often difficult when you get companies from $25 billion to $100 billion in market cap when you and find a true competitor, he told CNBC.
“It does create a bit of an issue,” he said.
Miller noted that Facebook’s lackluster performance will perhaps make investors wary of investing in new IPOs in the near future.
“Investors may take a pause after how the Facebook transaction has traded,” he said, adding that current market volatility is also an issue.
“April was the worst month in terms of money flows since 1984, and May is trending in that direction, so we need a turnaround in volatility,” he said. “I think we are going to take a pause here in the new issue market (until we see the) macro issues subside.”
The Associated Press contributed to this report.
