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When Facebook went public with an IPO in May each share cost $42. Now, each Facebook share is being traded at around the $20 mark. That has to smart.
On May 18 of this year Facebook was listed on the stock exchange with the opening price of $42.05 per share. Over the course of the day the price fluctuated between $38 and $45, eventually settling at just above the IPO price. In the week that followed its IPO the Facebook share price fell to $31, the week after to $27. There then followed a brief resurgence through the end of June and beginning of July before it once again started to drop. CNBC has all the gory details.
And so we come to today, Aug. 2, when the Facebook stock hit a new low of $20 per share. That’s a fall of 47 percent from the IPO price, and many analysts think there is more misery to come for early investors. The question now is how low will the price of Facebook stock fall before it bounces back?
There has been much mocking at the prospect of Facebook soon being worth less than the $44.6 billion Microsoft offered to buy Yahoo for back in 2008. If the stock price hits $16 then Facebook’s market cap will be less than that. Oops. But that is just an aside to the main story, which is if and when you should invest in Facebook.
It all depends how you think the company is going to fare in the longterm. If you think it will flourish in the years to come then that sub-$20 share price could look very appealing. Some analysts claim Facebook will reach IPO levels again around the end of 2013, so if you can hang on that long there could be money to be made.
In the meantime there is more scope for a freefall in the price, with the number of shares in Facebook multiplying as lock-ups on stock sales by company employees begin to lapse. They will do so in August, October, November, and December of this year, before a final one in may 2013.
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