The most overhyped initial public offering (IPO) in the history of mankind is officially in a bear market.
Facebook shares (NasdaqGS:FB - News) have already sunk 22% to around $35 per share from their $45 peak. A 20%+ decline from the peak price of a stock is the general definition of "bear market."
How weak was the social networking giant's IPO debut? It was so bad, that lead underwriter Morgan Stanley (NYSE:MS - News) was forced to buy up FB shares to prevent them from dipping below its $38 offer price. The Wall Street Journal described Morgan Stanley as Facebook's "stabilization agent." (Where's the Securities and Exchange Commission when you need them? Apparently, they still permit "controlled" and "planned" market manipulation.)
Retail investors weren't the only ones who went bananas for Facebook.
Several Wall Street analysts issued buy ratings even before the company went public. Wedbush Morgan and Stern Agee had buy ratings on Facebook at $44 and $46 per share, respectively.
The fact that FB shares are trading lower suggests that underwriters mis-priced the shares, leaving gullible investors and traders with a sack of coal. In contrast, tor Facebook insiders, venture firms, and fee-collecting underwriters, the IPO was a bonanza.
Facebook's earnings in the 12-months through March 31 were $972 million on sales of more than $4 billion. That gives the company a gluttonous valuation of 107x trailing 12-month earnings.
Since the beginning of the year, the Nasdaq-100 (NasdaqGS:QQQ - News) is ahead by 9.10%, S&P technology stocks (NYSEArca:XLK - News) are up by 8.28%, and the Global X Social Media ETF (NYSEArca:SOCL - News) has gained 1.32%.
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