Facebook Shares Drop Below IPO Price in German Trading

Facebook Inc. (FB), the social networking site that raised $16 billion in its initial public offering, fell below its $38 offer price in its second trading day. The shares dropped 6.6 percent to $35.72 as of 9:30 a.m. in New York, after earlier declining 8.3 percent to $35.06. The stock was little changed at $38.23 at the close of its first day of trading on May 18. Facebook, with more than 900 million users, is trying to attract more marketers to boost sales as competition increases. The company, the No. 1 provider of graphically based online ads in the U.S., is set to lose the top spot to Google Inc. (GOOG) next year, according to EMarketer Inc. The offering valued Facebook at 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential. (EQR) “There are only so many people that are going to buy into a hyper-growth story,” said Michael Pachter, an analyst with Wedbush Securities Inc. in Los Angeles, who rates the stock outperform and doesn’t own it. Morgan Stanley (MS), the bank that handled the IPO, stepped in to prop up the stock from dipping below the offer price on May 18, said people with knowledge of the matter, who asked not to be identified because the purchases were private. Nasdaq OMX Group Inc. (NDAQ) Chief Executive Officer Robert Greifeld said a “poor design” in software driving auctions for IPOs caused issues with Facebook’s first trading day. Facebook Revenue Sales at Facebook came in at $3.71 billion last year. That puts it below the top 50 U.S. technology companies by revenue. Google Inc., valued at almost twice as much as Facebook, reported $37.9 billion in revenue last year. Google jumped 18 percent on its first day of trading in 2004. Facebook was the 11th U.S. consumer Internet company to go public in the past year, a stretch that began with LinkedIn Corp. With a valuation of $104.8 billion at the May 18 close, Facebook is worth more than three times the other 10 combined. LinkedIn, (LNKD) a social network for professionals, is second, valued at $10.3 billion. LinkedIn surged 109 percent last May after its IPO. Groupon Inc. (GRPN), the biggest daily-deal coupon site, began trading on Nov. 4 at $20 and rose 31 percent that day. Groupon’s shares closed at $11.58 on May 18.