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In what is sure to be deemed as a disappointing debut, Facebook
FB shares plunged on their second day of trading. The IPO fell 11% to close at $34.03, below the $38.00 deal price. Given the size of the deal, the problem for the underwriters is that their big clients are now sitting on sizable paper losses after just two days of trading.
In a perfect world, the Facebook IPO would have gone much better. There is considerable skepticism on the Street about FB, primarily because the company was given such a high valuation. Most investors agree that Facebook is a transformative and disruptive company, but valuation is definitely a sticking point. Do not be surprised if the stock continues to fall in the coming days as investors cut their losses and hype and hope turn into discouragement.
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