Facebook Inc stock price nosedived to $28.19 at the close of trading on Wednesday as wary investors continue to offload the company’s shares. The social networking giant has shed more than $25 billion in value that is close to the market valuation of the company’s lead underwriter – Morgan Stanley.
Investors are hard hit and so is the state of California which was looking forward to the $1.5 billion in taxes from the Facebook IPO to patch the state’s $15.7-billion deficit. Incidentally, Gov. Jerry Brown’s administration had pegged $35 per share – lower than the $38 initial price.
The downhill movement of Facebook has led Wall Street to raise concerns regarding the advertisement model that seems to be somewhat elusive on the mobile platform. The growing number of users of Facebook on smartphones and other mobile platforms is in sharp contrast with the revenue so far. Currently, Apple Inc and Internet search giant Google dominate the mobile platform.
The quest to step up a revenue model on the mobile platform is highly speculated, and if Facebook acquires Opera, it could change the game in its favour. In the midst of speculations, it’s becoming clear that Zuckerberg is planning to build a Facebook smartphone. The easy and the fastest way out seems acquiring mobile operating system and hardware expertise together.
Post the IPO, Facebook wouldn’t want to be just another app on the Android or the iOS or just a website. Facebook’s dabbling with areas outside their expertise could definitely trouble some investors, but long-term gains can be predicted if it does so. However, the very same reason might be behind the fall in share prices in the past two days.
What’s Facebook Wall status now?
Facebook’s shares prices have been on the downhill spiral and many sceptical and old-school players might have had the prediction right, and that’s why they did not buy the shares. They are likely to wait for the first lockout period to get over on August 20 when insiders will sell their shares. For some, that’s the time to buy the shares.
Facebook, at best, is in a transition phase now. The IPO has made Facebook get to the ground reality quicker than it would have. The primary source of revenue for Facebook is advertising and the failure to keep up with smartphones has put off many investors.
Right before the IPO debut, General Motors pulled out of the paid advertising campaign on Facebook, putting a question on the relevance of advertisements on the website. There was a clear lack of evidence that could prove strong return on investment (ROI) when advertising on Facebook.
What’s coming next?
Facebook’s future path is as hotly speculated as the IPO debut, but there’s a difference. The strategy that Facebook might adopt should prove to be a crucial step towards securing a foothold on the mobile platform and generating revenue from it.
The speculations about acquiring Opera will sound good if Facebook considers buying HTC or RIM – that would be quite a readymade solution for stapling a mobile operating system on hardware with a proven track record.
Facebook had all the time in hand but it took hasty decisions that didn’t fare too well. There’s not much time now, but Facebook has to decide fast and do so precisely.
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