Why Facebook lost value and not just because they’re changing ‘Timeline’ again

The positive buzz around Facebook’s I.P.O. starting public trading dissipated on Tuesday as Facebook stocks dropped to $31.00.  Despite its massive user base, it seems that Facebook will now have to face the reality that their value is not as high as the company wishes.  A stock selloff almost turned into a run on Monday.  Tuesday was a day ofnumerous announcements that may have affected Facebook’s rapidly dropping stock value as well as many sitesanalyzing why Facebook’s stock has dropped.

Reuters reported that the social network had settled a lawsuit in San Jose, Calif. over the “sponsored stories” feature.  Facebook had publicized users’ likes and preferences without allowing the option to opt out or be compensated.  Facebook now offers users the chance to opt out of sharing their likes and preferences with a few clicks of their mouse.  The terms of the settlement are not complete in the court documents.

Nasdaq announced that there had been some “technical glitches” regarding the Facebook stock.  Investors lost money as the technical glitch stopped many from selling their shares.  The delay in selling shares may have helped contain the stock’s rapidly dropping price.  Morgan Stanley, the lead banker on the I.P.O., stepped in at least once to help stabilize the price.

CNET.com looked at Facebook’s profit margins and estimated that despite the huge number of users Facebook has, it is just not worth $100 billion.

So how did the most heavily hyped stock completely fall on its face? There are a lot of reasons: glitches with the Nasdaq system that slowed early orders, an IPO price that got a last-minute bump, and indications of lackluster demand from institutional investors. But the most important is the underlying concern and growing realization that Facebook just isn’t worth $100 billion.

Another announcement that may have affected Facebook’s value would be the announcement on Tuesday that Facebook is again editing their layout.  Facebook has confirmed they are quietly testing a new look for their “Timeline” profiles.  Every time that Facebook changes the layout of their site, there are complaints from all over the internet.  In the future, this may affect the stock value.

Maybe the company, now that it is worried about profits, will remember the reaction of the user the next time they change the layouts so drastically.


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