Facebook's IPO Disaster Raises Speculation About Zuckerberg's Future
The continuing slide in Facebook's stock price is fueling speculation that the social network might be better off without co-founder Mark Zuckerberg at the helm.
Facebook shares hit a record low of $19.87 at the close of trading Thursday. The slide continued Friday morning with the stock sinking to $19.06 around 11:30 a.m. ET.
The record lows come as early investors, including Goldman Sachs, became eligible Thursday to sell their shares. That made 271 million shares eligible for trading, though it's not clear how many have been sold.
The drop in share price is another piece of what has been a troubled initial public offering for the world's largest social network. A few months ago, industry analysts and investors had expected Facebook's stock to take off, soaring from its opening price of $38 a share to $50, $60 or more.
However, that hasn't happened. Instead, the company's IPO has been hammered, sinking instead of growing.
"I think so much of stock price is about confidence and perception, and Facebook has shattered a bit of the faith that investors had," said Andrew Stoltmann, a securities lawyer based in Chicago. "I think there's a lack of confidence in his ability to run a publicly traded corporation. Coming up with lightening in a bottle like he did is an extraordinary skill, but it's not the same skill as running a publicly traded company."
Stoltmann, who said he doubts that we've seen the bottom of Facebook's stock price yet, added that bringing in a new CEO would be a great idea for the company right now.
"Look, Zuckerberg, by all accounts, is a genius," he added. "But you have to have a grown up or a more experienced chief executive running that company."
But Zuckerberg still has his backers.
Patrick Moorhead, an analyst with Moor Insights & Strategy, said it's too early to start talking about replacing Facebook's CEO.
"He has provided the vision Facebook needed to build [the company up] to these heights and they will need him to continue to guide them," Moorhead said. "Zuckerberg needs to keep the top spot for right now to give Facebook a chance. Remember, the issues at hand are the repercussions from a flawed IPO, not a flawed company."
Karsten Weide, an analyst with IDC, said there's no way she sees Zuckerberg making way for a new business leader at the company he founded.
"Mark Zuckerberg is not going to step down any time soon," she said. "He is a man on a mission, wanting to force the world, if need be, to more openness. And as a man on a mission, he does not primarily care about business."
It's business that Stoltmann is concerned with, even though he said it is too early to throw a flag on Facebook's IPO at this early date.
"You have to give any company, especially a young company, time to mature in the market," he said. "We are all impressed with short-term movements of the stock price, but you have to give it a year or two before you start crucifying the company."
That doesn't mean, that Facebook hasn't made some big mistakes.
Stoltmann said Facebook and Morgan Stanley set the opening stock price too high. "They grabbed the cash. The bad news is the stock price has tanked and you have a whole bunch of ticked off investors," he said.
While Stoltmann doesn't see Facebook's sinking stock price harming the overall tech market, it has hurt a lot of individual investors.
"Well, it's bad," he added. "You had a heavy concentration of smaller investors buying this stock and they've been hammered. Talk about eviscerating investor trust in the capital market."
Weide agreed that small investors are being hit harder than Facebook itself.
"The fact that the Facebook stock price has sunk below $20 has hurt a lot of small investors who bough the stock at $40 or so, thinking they could strike it rich," she said. "Other than that, it is just the market establishing the true value of Facebook, which at $20 is perhaps about fairly evaluated... Just because the stock price has sunk a lot, doesn't mean Facebook is in trouble. It doesn't really directly affect their operations. But it does show that a lot of people now think the dream of making trillions with social is over. Great expectations meet reality."
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is firstname.lastname@example.org.
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