This week Facebook’s shares plunged to a record low of $26.80 (R222.7) since it began trading at $38 (R314). According to Mark Wilkes, trader at global trading platform GT247.com, at $38 a share, Facebook was overpriced on its listing. “The issuers at the time of the initial public offering got too greedy and tried to force the price much too high. The original price was in the mid twenties and they thought they could sell masses of stock into the public’s hands,” he said.
Much hype surrounded Facebook, which boasts 900 million users, when it listed on the Nasdaq last month. But its share price fell soon after the listing when doubts surrounding its money-making abilities hit home. A poll released by Reuters/Ipsos showed that, 34% of the social network’s users are spending less time on it than they were six months ago compared with 20% that said they were spending more. It also found that only one in five people bought products on the website through advertising.
South African investors were only marginally exposed to Facebook through global media company Naspers. “We could invest indirectly via Naspers which has a holding in Tencent, which has a holding eventually in Facebook. South Africans could also have gained exposure through their offshore accounts,” said Wilkes.
Wilkes added that the timing of the listing was also poor. “They chose an awkward time in the markets as well because their listing coincided with a weak undertone in the market. People were anxious to pick up even a so called fantastic stock, such as Facebook, while [markets in the] United States and Europe are struggling. It all added to the negative sentiment,” he said.