* Shares fall more than 12 percent in early trading
* Nasdaq says it will change IPO procedure
* “Priced for perfection” at $38 – analyst
By Chuck Mikolajczak and John McCrank
May 21 (Reuters) – Facebook stock sank on Monday in
the first day of trading without the full support of the
company’s underwriters, leaving some investors down nearly 25
percent from where they were Friday afternoon.
Facebook’s debut was beset by problems, so much so that
Nasdaq said on Monday it was changing its IPO procedures. That
may comfort companies considering a listing but does little for
Facebook, whose lead underwriter Morgan Stanley had to
step in and defend the $38 offering price on the open market.
Without that same level of defense, its shares fell $4.64 to
$33.67 in the first minutes of trading. That represented a
decline of more than 12 percent from Friday’s close and about
24.4 percent from the intra-day high of $45 a share.
Volume was again massive with more than 52 million shares
trading hands in 15 minutes. Nearly 581 million shares were
traded on Friday in the five or so hours that the stock was
open.
As the stock fell, there was a long list of questions —
ranging from whether the underwriters priced the shares too high
to how well prepared the Nasdaq was to handle the biggest
Internet IPO ever — and few immediate answers.
“It was just a poorly done deal and it just so happens to be
the biggest deal ever for Nasdaq and they pooched it, that’s the
bottom line here,” said Joe Saluzzi, co-manager of trading at
Themis Trading in Chatham, New Jersey.
NASDAQ CHANGES
Nasdaq said Monday morning the changes it was making would
prevent a repeat of what happened Friday, when glitches
prevented some traders from knowing for hours whether their
trades had been completed.
The exchange also said it would implement procedures to
accommodate orders that were not properly executed last week.
A source said Morgan Stanley’s brokerage arm still had a
“large number” of share orders from Friday that were not
confirmed, which it was working to resolve.
A Facebook spokeswoman declined to comment on the share
price issue.
But analysts said that after the initial frenzy, investors
were quickly becoming cautious about the stock.
“Investors are increasingly aware of the risk embedded in
the stock price. There are real concerns about growth and
advertisers’ frequent lack of certainty how best to use
Facebook, along with rising costs and ongoing acquisition risk,”
said Brian Wieser at Pivotal Research Group, who has a $30
target on the stock.
“At $38, the stock is priced for perfection in a manner that
implied that risks were negligible.”
(Reporting By Chuck Mikolajczak, Jennifer Saba and John McCrank
in New York; Writing by Ben Berkowitz in Boston; Editing by
Edward Tobin and Maureen Bavdek)
