Shares of Facebook plummeted Tuesday even as the Nasdaq showed slight gains

Investors are continuing to hammer Facebook just 11 days after its initial public offering, sending the stock of the social networking powerhouse down 9.6 percent in trading Tuesday. The stock closed at $28.84, the first time it has finished below the $30 mark. Facebook went public at $38 per share earlier this month, with many questioning the lofty $104 billion valuation that was placed on the company at the time.

It is now valued at $61 billion.

Forbes reports that CEO Mark Zuckerberg saw his paper wealth decline by $1.5 billion Tuesday, valuing him at $14 billion. Meanwhile, Zynga, the social gaming company whose business is directly tied to Facebook, also has been hit hard in recent days. On Tuesday, it lost nearly eight percent of its value, part of a 12 percent slide over the past five days.

Instagram’s valuation also has dropped below the $1 billion mark to $963 million, following the proposed acquisition offer from Facebook which combined both cash and stock, according to PrivCo. Reuters also reports that Facebook’s purchase of Instagram will receive a lengthy review by the Federal Trade Commission.

Microsoft, which invested $240 million in Facebook in 2007 for a 1.8 percent stake, also has seen its investment plunge. However, the company sold 6.5 million shares as part of the IPO, recouping about $250 million.

Comments

  • Victor

    It’s a good thing this little bubble burst fast. So goes with all the little startups that were hoping to sell to Facebook or dreaming of fabulous VC raises. It’s time to get back to building companies that can generate real revenues. Even at $61B market value, it is incredibly generous valuation for a company, that’s P/E of 60 times for a business that just hinted a slow down in its growth.

  • http://twitter.com/nakedcmo Luis J. Salazar

    It really puzzles me why the market thought that 80 times P/E was good. Facebook built a great company, to build the world’s largest gathering of people online is not a small feast, and it is worth probably $20B to $40B of 5x-10x projected revenues if one compares them with other large digital media companies. But they all face the same pressures as 

    1) advertising monetization is a macro economic challenge – http://www.thenakedcmo.com/2012/04/making-web-3-profitable-beyond-display.html

    2) user pc to mobile migration is real and that tiny screen is very hard to monetize using tired display ad technology, regardless of the engagement level of the users – http://www.thenakedcmo.com/2011/10/ever-increasing-gap-on-mobile-web.html

    Personally, I rather invest on Seattle entrepreneurs focused on this challenge of building monetization technologies for internet companies, rather than investing on companies building the next Instagram that will never make money but will be acquired – http://www.thenakedcmo.com/2012/05/smarter-cloud-made-in-seattle.html

    • http://www.mcbuzz.com/ Mark McLaren

      Amen, Luis. You make several great points. I especially appreciate the one about monetizing “that tiny screen”. It’s something investors need to think long and hard about. Technological advances and adoption by consumers are happening rapidly. Advances in advertising are not keeping up!

  • http://twitter.com/mikeindustries Mike Davidson

    Poor Instagrammers…

    • Joe d’Coder

      Sure is a bummer to no longer be worth a $Billion.

  • Joe d’Coder

    The real damage is to all the other companies that were thinking of an IPO this year.  Hopefully some good will come of this – IPOs where the insiders are cashing out will get crappy valuations.  But, I fear that PT Barnum was right.

    • Guest

      Not just IPOs this year…but, IPOs a year or two down the road.

      The Facebook-effect to Series B and Series C rounds is going to be tragic.

    • Mark

      On the other hand this could be a blessing for companies looking for an IPO who have tangible products with proven revenues.  

      • Joe d’Coder

        Every IPO is going to get lots of scrutiny and there will be some gun shyness when setting the initial price.  That means money will be left on the table.  
        @guest – do you seriously believe that  Series B and C will be happening anytime soon?  After that disaster?

  • http://twitter.com/jclaussftw Jason Gerard Clauss

    Time to start shorting.

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