Social network giant Facebook has the dubious honour of producing the worst return in a first week of share deals in the last ten years and is being sued under the claim that it misled investors.
Three of the investors going to court allege that Facebook told their underwriters to reduce their 2012 performance estimates because more users are using the mobile apps, which do not generate advertising revenue, and left some investors out of the loop while sharing the data with preferred investors. The investors say they received a “false and misleading” registration statement and prospectus.
And in its first results presentation as a public company yesterday, Facebook announced revenues that just came in ahead of analysts’ predictions, but only by a whisker, with shares falling 11 per cent to a record low of $23.94.
The worry for most investors surrounds mobile use, with Sam Hamadeh, founder of private company financial data authority, PrivCo, commenting on the fact that 57 per cent of Facebooks users are now mobile:
“That’s a serious problem for them. I don’t think that they can innovate fast enough to keep up with that shift,” he said. “The results are a ‘meh’. They are a little better than expectations but not enough for you to call this anything other than a miss.”
However, Mark Zuckerberg, Facebook’s founder and Chief Executive retorted that the company’s goal is to help every person to stay connected and that their vision is “bigger than most people perceive.”
And Facebook’s chief financial officer, David Ebersman said that while the company’s management is “disappointed about how the stock traded,” the important thing for them is to “stay focused on the fact that we’re the same company now as before.”
As an accountant, Simon Rowe, specialises in corporate finance, business turnaround and insolvency.