Facebook IPO

It’s a good thing that Facebook creator Mark Zuckerberg  is worth well over $17.5 billion dollars, because his newest Facebook scheme isn’t panning out quite how he thought. The new Facebook initial public offering (IPO) was created and made public on May 17.

The Facebook IPO has been called many things, and a success is not one of the words used to describe it. In fact, it has been called the “Gigli” of IPOs (meaning that it is a huge flop).

Why didn’t Facebook do as well as they originally thought?

One of the main reasons that ruined the IPO is the price. It was priced way too high, at around $42 per share. Since the first day of the IPO being made public, shares have dropped to about $31 per share, with an initial loss of $17.16 billion. Originally investors were told that the initial value was around $104 billion.

Apparently, the company is only worth about $7.50 per share, according to moneymorning.com. Revenue is already slowing and the company does not and cannot possibly dominate the mobile markets that are becoming the preferred channel for millions of people.

Not only is Facebook getting hit hard with the IPO debacle, but companies have started pulling their advertisements. Companies like General Motors (GM) are deciding not to renew their advertising. This is going to hit Facebook to the tune of $10 million a year for the loss of GM alone.

That’s not all that is going on with Facebook. They’re also being sued over their IPO.

According to techradar.com, Facebook is being sued by their shareholders over inconsistent IPO forecasts.

The shareholders are claiming that Facebook, along with the company’s key underwriters, mislead investors about the company’s growth forecasts.

The lawsuit addresses the fact that just before Facebook went public, the principal underwriters reduced their estimates for the company’s second quarter growth without telling some investors about new key information. The lack of that information, the suit claims, inflated Facebook’s IPO price and caused losses from investors not “preferred” by Facebook.

The lawsuit specifically targets Facebook and their principal underwriter Morgan Stanley, as well as underwriters Barclays Capital, Goldman Sachs, JPMorgan Chase, and Merrill Lynch.

Zuckerberg doesn’t seem too concerned over these allegations, as he has been seen out and about in his normal jeans, flip-flops, and his hoodie.

In fact, a Facebook spokesperson has been quoted as saying “We believe the lawsuit is without merit and we’ll defend ourselves vigorously.”