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A television reporter talks about the Facebook stock at the Nasdaq Stock Market in New York.Keith Bedford/Reuters

As Facebook Inc.'s share price continues to swoon, regulators and investors are questioning whether underwriters and the Nasdaq Stock Market mishandled the year's most anticipated initial public offering.

The heads of two top U.S. regulators – the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) – are calling for a review of the IPO amid concerns that glitches at Nasdaq caused serious delays in opening-day trading and that the IPO's lead underwriter quietly lowered its financial projections for the company shortly before the stock made its debut.

The concerns have grown as the $16-billion (U.S.) IPO, the third-largest in U.S. history, looks like more of a flop with each passing day. The shares fell again Tuesday to close at $31 – nearly 20-per-cent below the IPO price and more than 30-per-cent below the $45 peak they reached when trading began Friday morning. The more the stock languishes, the more questions arise about how such a huge and closely watched stock offering could have stumbled so badly – and what it implies about the market's confidence in Facebook and new share offerings in general.

"I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook," SEC chairman Mary Schapiro told reporters Tuesday.

Reports surfaced Monday that analysts at lead underwriter Morgan Stanley cut their revenue forecast for Facebook in the days before the IPO – information that didn't reach all investors prior to the stock's debut. JPMorgan Chase and Goldman Sachs, which were also part of the underwriting group, also reduced their estimates.

FINRA is also continuing to look at Nasdaq's trading problems on Friday, which caused some buy and sell orders for Facebook to go unfilled and unconfirmed for hours after they were placed – a situation that halted trading in the new stock and may have caused millions of dollars in trading losses.

Meanwhile, Wall Street analysts are questioning the pricing and size of the IPO in light of the stock's poor performance in its first three days. They said underwriters clearly over-estimated the market's appetite for the stock, leaving banks sitting with more stock than they can move and some sellers scrambling to find buyers for the falling stock.

"The underwriters clearly thought there would be a lot of demand – they raised the [size and price of]the offering," said analyst Nick Einhorn of IPO specialist Renaissance Capital.

Analysts said underwriters bought Facebook stock on the first of trading to keep it above the $38 IPO price, something underwriters often do in support of their new offerings. Since then, though, the underwriters have stepped away, and the stock's decline below the IPO price is sending a negative signal that has accelerated selling.

By many yardsticks, the stock still looks expensive. John Butters, senior analyst at U.S. financial research firm FactSet Research Systems Inc., noted that Facebook's stock was priced at nearly 50 times its forecast 2013 earnings at Tuesday's closing price, far higher than the 10 to 12 times multiple of other large tech companies such as Google Inc., Apple Inc. and Microsoft Corp. On the other hand, he said, its forecast earnings growth for the next three years is generally lower than most of its publicly traded social-media peers, such as LinkedIn Corp. and Pandora Media Inc.

"We love the company. We just didn't like the valuation," said analyst Brian Wieser of Pivotal Research, one of the few analysts who felt the IPO was overpriced. "They didn't need to increase the offering and they didn't need to increase the price."

Facebook's cool reception could be a setback for the IPO market, which has been struggling to regain traction after several tough years.

"It's definitely a negative effect," said Mr. Einhorn. "Underwriters may be a bit more conservative in their pricing [of future IPOs] or they might face some push-back from investors."

With files from Reuters