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Zuckerberg loses $2.2B: "There's no bottom" for Facebook
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Zuckerberg’s fortune drops $2.2 billion as Facebook shares drop
May 21 (Bloomberg) -- Mark Zuckerberg’s fortune dropped $2.2 billion as shares of Facebook Inc., the world’s largest social-networking company, fell below the company’s $38 offer price in its second day of trading.
The shares sank 11.3 percent to $33.90 at 12:37 p.m. in New York, after declining as much as 13.7 percent to $33. Zuckerberg’s stake is valued at $17.1 billion. He had ranked 26th on the Bloomberg Billionaires Index on May 18.
“If you went out and spent on Friday, you’re not canceling the order for the Lamborghini just yet,” Martin Pyykkonen, an analyst with Wedge Partners in Greenwood Village, Colorado, said in a phone interview. “For the most part, those with a substantial stake still have plenty of value.”
Facebook raised $16 billion in an initial public offering, selling 421.2 million shares for $38 each on May 17. It was the biggest technology IPO in history. The stock was little changed at $38.23 at the close of May 18.
The IPO suffered from trading glitches on its first day. Nasdaq OMX Group Inc. Chief Executive Officer Robert Greifeld said a “poor design” in software driving auctions for IPOs caused issues with Facebook’s first trading day.
Dustin Moskovitz, 27, who started Facebook with Zuckerberg from their dorm room at Harvard University, owns 133.7 million shares of the company’s Class B stock worth $4.5 million, down $580 million during the day.
Eduardo Saverin, 30, has a $1.8 billion stake, down $230 million since Friday’s close. According to a regulatory filing dated May 17, he owns 53.1 million shares of the company.
Sean Parker owns 66 million Facebook shares valued at $2.2 billion. The 32-year-old persuaded Zuckerberg to move to California to focus on the company full time in 2004.
Facebook’s chief operating officer Sheryl Sandberg, 42, who was lured from Google in 2008, owns 27 million shares, including 25 million restricted stock units that have vested. They are valued at $915 million. She also owns millions of unvested units not counted in her net worth calculation.
Co-founder Christopher Hughes, 28, who was a billionaire when the company began trading May 18, now commands a nine- figure fortune. He owns about 22 million shares of Facebook, according to a person familiar with his holdings who asked not to be named because the matter is private. His stake is worth $746 million.
Hughes, who bought the Washington, D.C.-based magazine the New Republic in March 2012 for less than $5 million, has more than $100 million in cash and real estate after selling some of his Facebook hoard, according to data compiled by Bloomberg.
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Call it the Friday Facebook Fiasco — or a more colorful alliterative of your choice. Regardless, the chaotic opening of the much-hyped social network's stock scared away investors on Monday—and may keep them away.
Talk also lingered over whether Facebook [FB 34.03 -4.2018 (-10.99%) ] could monetize its 900-million-strong user base, as well as whether CEO Mark Zuckerberg really cared enough to make sure his shareholders are happy.
Overall, the twin worries of Facebook's pricing combined with the shaky mechanics of its trading to create a pungent air of uncertainty around the company.
As a result, Facebook opened Monday below its $38 Friday open and moved sharply lower through the day.
"They should have delayed it," says Dave Rovelli, managing director of US equity trading at Canaccord Genuity in New York. " They shouldn't have opened until 1 o'clock (Friday), until they fixed the glitch."
The Nasdaq exchange, which houses many of the market's biggest tech names, had trouble matching orders Friday morning and missed the expected 11 am Facebook kickoff.
Nevertheless, the stock made a quick move higher at the open, but then meandered through most of the session before finishing modestly higher at $38.23 on a powerful move from underwriter Morgan Stanley to defend the opening price.
Now, the stock faces nothing but questions as a market love affair quickly turned to estrangement. Underwriters were left powerless to support the price because the stock opened well below the $38 breakeven level, and rumors swirled that lawsuits would be forthcoming from those who didn't get orders filled properly.
"All the buy-side institutions are shorting it. You can get a borrow on it and everyone's leaning all over it. There's no bottom," Rovelli says. "The next catalyst is going to be earnings, which is three months away. So there's no reason to jump in here. You're catching a falling knife."
"What we're seeing here is the market is converging back to reality.”
Daniel Ernst
Principal, Hudson Square Research
In a previous CNBC.com interview, Rovelli had advised investors to stay away from the stock until the company had more visibility on how it would grow revenue.
Without more proof of growth capability, investors decided that perhaps the initial Facebook pricing range, with a low end of $28 a share, was more accurate than the final range.
"What we're seeing here is the market is converging back to reality," Daniel Ernst, principal at Hudson Square Research, said on CNBC's "Squawk on the Street" program. "We liked it at the bottom of the first range. The lower 30s, high 20s, we'd be more interested...Right now we're kind of sitting on the sidelines and watching it."
For Ernst, the story of Facebook is that as market sentiment cools, trader mentality will focus back on the fundamentals of value and earnings power.
"No doubt this is a fantastic company — 53 percent operating margins, 901 millions users around the world — they can provide detailed targeting to advertisers," he said. "I think this is going to reinvent digital advertising. I just don't want to pay 70 times earnings for it. I'd rather pay 50, 40 times earnings for that. So when we see earnings grow, either they'll grow into the multiple or the stock will pull back."
Companies more reasonably priced compared to earnings and revenue, such as Amazon [AMZN 218.11 4.26 (+1.99%) ], Google [GOOG 614.11 13.71 (+2.28%) ] and Apple [AAPL 561.28 30.90 (+5.83%) ], are much more enticing, he said.
For others, though, that specter of how trading went Friday coupled with other uncertainties to make the stock something to avoid for now.
"Unless you really want it in your portfolio I would wait for stability," says Phil Silverman, managing partner at Kingsview Capital in New York. "It was a total fiasco on Friday. I was really surprised it went down. It just showed you that at this point there's time to buy."
Interestingly, the broader stock market managed to put up a strong gain despite Facebook tanking, though some continued to worry that the fortunes of the two were entwined.
"When you do see some of these bigger IPOs start to really make headlines, it tends to mark the top of a market move," says Brian LaRose, analyst at United-ICAP in Jersey City, N.J. "We feel that could very well be the case here. When you look at many of these equity indexes, we feel we're in a peaking mode."
If nothing else, the problems with Facebook — after all the hype and expectations that the stock would soar and perhaps end the market's May selloff — could be further detriment to the already-battered sentiments of average investors.
"It leaves a bad taste in everyone's mouth," Canaccord's Rovelli says. 'We're trying to get the retail investor back on board, and everyone who bought it is getting creamed."
http://www.cnbc.com/id/47505908
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