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Facebook shares fall after 2 days on market

With headlines like ‘Facebook shares fall after 2 days on market’ there must be many concerned executives at the social media networking site.

The much vaunted launch of Facebook stock on Nasdaq was delayed by thirty minutes but it still managed to raise $16 billion. This valued the business at $104 billion. The execution hiccup may well have troubled investors as the site traded at $38 after just 2 days of trading.

Facebook was one of the most anticipated stock offerings in recent history. The site, which claims to have 900 million worldwide users, began trading publicly on 18th May. It was expected to prove that social media sites could be a viable investment but the sudden drop in value from $104 billion to $79 billion has worried investors.

Experts believe that the fall in value is down to two factors. The Nasdaq glitch that delayed the initial offering and a high availability of stock. Allegations of selective information disclosure and two shareholder lawsuits are also thought to have influenced the share price.

Allegations that analysts at large underwriting investment banks lowered their financial forecast just before the share offering and yet only told a handful of client have led to the lawsuits. Facebook state that the lawsuits are without merit whilst Morgan Stanley declined to comment.

So what will the future hold for Facebook's share price? Many experts believe that for the coming months Facebook stock will continue to be volatile. Within the next few months early investors will be able to sell their shares as the lock-up period ends. This flood of shares onto the market will no doubt water-down Facebook’s share price. Statistically IPOs have experienced an average of a 2 per cent declines on their share price once the lock-up period expires. Additional shares will also be offered in upcoming months as Facebook looks to pay for the acquisition of photo-sharing service Instagram for an expected $1 billion.

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