Technical Trading Issues to Blame for Facebook??s Fall
Source: EVELYN M. RUSLI
Speaking at the AllThingsD D10 conference on Wednesday, Ms. Meeker, a former Morgan Stanley analyst nicknamed “Queen of the Net,” described Facebook’s initial public offering as a “financial tsunami,” but placed most of the blame on the string of technical problems that rocked Facebook’s stock on its first day of trading. The I.P.O’s unprecedented size presented an enormous challenge for the Nasdaq, where it was listed. Morgan Stanley, her former employer and lead banker for the offering, also faced questions about its role in the I.P.O.
While Ms. Meeker did not explicitly fault Nasdaq, she said the early technical issues broke the market’s confidence and spooked skittish investors. “We’ve never seen anything like it before,” she said. “Confidence and momentum in the market is so important.”
Still, she said she did not expect the social network’s stock to rebound in the short term, but added that it was a “great” company that “will do very well.”
Since going public on May 18, Facebook’s stock has been pummeled, bogged down by technical issues, uneasy investor confidence and concerns about the company’s fledgling mobile business. On Wednesday morning, Facebook opened at $28.69, more than 24 percent below its offering price.
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She said Facebook’s shares would eventually rebound, but it was difficult to predict the shape or timing of the recovery. Ms. Meeker also said that she believed that if the Facebook I.P.O. had been conducted via an auction (as Google’s offering was in 2004), the shares would have priced significantly higher.
While the spotlight has glared brightly on Facebook in recent weeks, it is far from the only tech darling to fall after its I.P.O. During her presentation, Ms. Meeker said that the shares of many start-ups, like Zynga and Groupon, had pulled back significantly. She said this performance points to a big confidence gap between the private and public markets. In 2011, Facebook, Zynga and Groupon all traded in the secondary markets well above their current market valuations.
She said the lack of confidence in the public market wasn’t necessarily a bad thing, as investors were operating cautiously instead of recklessly. But she said private investors would need to think more carefully about their investments and their exit plans. She warned that rising prices in the private market could eventually hurt early investors looking for an I.P.O. exit.
For Kleiner Perkins, the prices, for now, are simply too high. Ms. Meeker said her firm, an early backer of Google, didn’t invest “a penny” in the March quarter. “We’re having trouble getting comfortable with the prices,” she said.
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