Facebook has lost almost 18% from the opening price of its IPO. With so much hype leading up to the launch, you would have expected it to skyrocket. Maybe something went wrong, or maybe a few things did.
First of all, their valuation was hyper-inflated at $104 billion. For a company with revenue estimates before the IPO slightly over $5 billion per year, that's pretty high. As a comparison, Amazon has a market cap at approximately $97 billion with revenues over $13 billion for the first quarter of this year, and Google has a market cap of approximately $197 billion with revenues of $10.65 billion for the first quarter.
Secondly, the lead underwriters of Facebook's stock, Morgan Stanley, Bank of America, JPMorgan, and Goldman Sachs, all reduced their revenue and earnings estimates for the social network by approximately 5%, with the guidance of a Facebook executive. They made these significantly large changes without alerting anyone except for a few preferred clients. There are now many lawsuits open against all companies involved.
Thirdly, Nasdaq's software is being blamed for improperly processing the buy, sell, and cancellation orders placed on the day of the IPO, according to Bloomberg. This caused many investors hours of delay in order execution, leaving them unsure of whether they owned shares or not. Some cancelled orders were still executed, buying shares at higher prices from earlier in the day as the stock dropped. There are lawsuits against Nasdaq open as well.
Business section: Investing ideas
Many investors regret purchasing Facebook stock because of the fiasco that it has become and the money that they've lost. If there hadn't been so many mistakes, it might have popped up instead of plummeting.
It makes you think -- what should have I invested in instead?
To help answer that burning question, we list below stocks that have gained approximately 18% in the same time period Facebook lost 18%.
List sorted weekly performance. (Click here to access free, interactive tools to analyze these ideas.)
1. Benihana: Operates Benihanateppanyaki-style Japanese restaurants. Market cap at $289.05M, most recent closing price at $16.13. The stock has gained 19.66% over the past week.
2. Overseas Shipholding Group
3. Denison Mines
4. US Airways Group
5. AFC Enterprises
6. Movado Group: Designs, sources, markets, and distributes fine watches and jewelry. Market cap at $728.25M, most recent closing price at $29.03. The stock has gained 18.93% over the past week.
7. Oxford Resource Partners: Engages in the production of steam coal and surface mined coal in the United States. Market cap at $172.18M, most recent closing price at $8.15. The stock has gained 18.63% over the past week.
8. Capital Trust: Operates as a real estate finance and investment management company that specializes in credit sensitive financial products in the United States. Market cap at $73.41M, most recent closing price at $3.30. The stock has gained 18.28% over the past week.
9. First Acceptance: Engages in retailing, servicing, and underwriting non-standard personal automobile insurance primarily in the southeastern and midwestern United States. Market cap at $58.4M, most recent closing price at $1.43. The stock has gained 18.18% over the past week.
10. Vista Gold
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Danny Guttridge does not own any of the shares mentioned above. Data sourced from Finviz.