According to the Winnipeg Free Press, Facebook's stock isn't doing so great. After two days on the market, the stock already dropped below its $38 IPO price to $34.03, losing the company $10 billion of its market value.
"There must have been some sober second thoughts about this," said Brian Wieser, an analyst at Pivotal Research Group who was first to come out with a "sell" rating on Facebook's stock on Friday. It's not that he thinks the world's largest online social network is a bad investment. But at $38 per share, it's just too expensive considering the risks associated with Facebook's brief history and unproven advertising model, he said. His fair price, or "target price," is $30.
Initial public offerings are a delicate game of supply and demand. The investment banks orchestrating the transaction, the deal's underwriters, work with the company to decide how much stock to sell and at what price.
In Facebook's case, says Michael Pachter, an analyst with Wedbush Securities, the "underwriters gave FB poor advice and allowed them to sell too much stock, then didn't properly sell the deal."