Here’s another way of summing up how bad Facebook Inc.’s performance has been since its initial public offering in May: Look at the company it is keeping.
Bespoke Investment Group looked at the worst-performing stocks within the Russell 3000 index since May 17, which is when Facebook priced its IPO. If you thought that the list of stocks that have endured worse performances than Facebook would be long and varied, given that there are 3000 stocks in the broad index, you would be wrong.
As of Tuesday’s close, Facebook has fallen 31.9 per cent – and there are just six stocks in the Russell 3000 with bigger declines. Perhaps even more scathing is the observation that these six worse stocks have relatively tiny share prices, making them little more than penny stocks.
“Taking a closer look at these six stocks, this is probably not the company FB intended to keep when it IPOd,” Bespoke said on its blog. “Not a single company on the list had a closing price of more than $2 per share today, and one of the companies, FriendFinder, is often described as the ‘adult’ version of Facebook. Oh, how the mighty have fallen.”
The problem with Facebook’s IPO is that it priced the shares at an absurd 100-times earnings, which leaves little room for doubting the company’s ability to grow its earnings at a spectacular clip. Over the past few weeks, the doubting has been loud and frequent.
A Reuters/Ipsos poll on Facebook users, released on Tuesday, presented the latest suggestion that the social media site might not be a runaway success. According to the poll of 1,032 Americans conducted after the IPO, 34 per cent of respondents spend less time on the site than they did six months ago (top reasons: site is boring, not enough time, concerns about privacy). The biggest drop was among the much-coveted 18-34 year-old group. And just one in five respondents has ever purchased a product based on a Facebook ad.
Of course, Facebook might become a compelling buy among some investors when the price gets low enough – I’ve seen targets as low as $12 (U.S.) – but if the share price does get that low, you better believe the news on Facebook will be so grim that it will take a will of iron to actually pull the trigger and buy.