Less than 10 minutes into the trading day Tuesday, Facebook's stock fell by nearly 9 percent after Monday's unenthusiastic showing, thanks to a high IPO price and the fact that it's still not clear how much money the company can make. The stock, which debuted Friday at $38, dropped as low as $31.03 in the first few minutes of trading, before climbing slightly to its current price of $31.54. It dropped 12 percent Monday, CNN Money reports.
Before trading even opened on Tuesday, people hemorrhaging money on the tanking stock were looking for someone to blame. It's the underwriters, led by Morgan Stanley, who are being criticized, Bloomberg reports. "The bank decided with Facebook executives to boost the size and price days before the May 17 IPO, ignoring advice from some co-managers, said people with knowledge of the matter, who declined to be identified because the process was private."
As The Los Angeles Times' Jessica Guynn pointed out, the problem is a pretty simple one of too much stock and not enough potential to make money: "Monday's sell-off renewed questions about Facebook's lofty-$93 billion market capitalization. Facebook is trading at 59 times projected earnings for the next 12 months versus Google at 14." This is the problem with getting married right after a major business move, as Facebook founder Mark Zuckerberg did: If disaster strikes, you wind up postponing your honeymoon.