Facebook sinks to record low

Jul 31, 2012, 10:29 PM EDT
REUTERS/Shannon Stapleton/Files

* Stock's downward spiral continues, nears $21* Slowing growth, stock overhang, Bernstein valuation allweigh* Facebook investigating Limited Run's accusations (Updates share price; Adds analysts' comments, details ondot-com; updates stock price)By Gerry ShihSAN FRANCISCO, July 31 (Reuters) - Facebook Inc's shares slid 6.2 percent to another record low on Tuesday, divingfor the third straight day since lackluster results showeddecelerating user growth and revived doubts about its ability tosustain its rich valuation.A sobering report from Bernstein Research, combined withonline chatter about the potential proliferation of automatedFacebook accounts and a looming sell-off of employee shares nextmonth all conspired to rock the stock, analysts say.Facebook has lost more than 40 percent of its value sincebecoming on May 18 the first American company to debut with avalue of more than $100 billion.The stock, down 6.2 percent at $21.71, still trades at morethan 40 times forward earnings, versus Google Inc's 15.Investors have punished the stocks of the No. 1 socialnetwork and other consumer-focused Internet companies such asZynga Inc, questioning their ability to sustain growthand maintain lofty valuations.Last week, Facebook reported results but offered no outlookor forecast for the year, disappointing investors who had hopedfor affirmation of its growth prospects.Wall Street is also bracing for a potential deluge ofhundreds of millions of shares after Aug. 16, when Facebookemployees can sell their company-awarded shares for the firsttime."It's a combination of the Bernstein note, and partlycomplaints about the Facebook bot. Lockups are also causingpressure on shares today," said analyst Herman Leung ofSusquehanna Financial Group, which owns and is a market maker inFacebook shares."People are just wondering what the next update is, andthere's more headwinds than not. But the long-term story stillfeels intact."Facebook's IPO was to have been the culmination of breakneckgrowth for the company that Mark Zuckerberg started 8 years agoin his Harvard dorm room. Instead, the May 18 Nasdaq debut wasmarred by trading glitches and accusations of inadequatedisclosure.On Tuesday, UBS blamed a 349 million Swiss franc($360 million) loss from Facebook's botched debut on exchangeoperator Nasdaq, becoming the latest financial investmentinstitution to report a hit from the first day of trade.UBS said orders for the stock had been entered multipletimes due to a systems failure.PILING UPCompounding Facebook's woes was a Tuesday report fromBernstein Research analyst Carlos Kirjner that valued itsdisplay advertising business at just $19 a share, half thecompany's $38 IPO price.Kirjner set Facebook's 12-month target price at $23, placinga $4 premium on what he said was untapped advertising potentialaround the company's innovative social graph. But, thatpotential remains "yet to be defined and built," he wrote.Kirjner on Tuesday upgraded Facebook to market perform, butsuggested that the lockup's expiry, which could unleash up to211 million shares, will weigh on the stock.The size of the current float could be nearly tripled byNovember, as more and more employees begin to sell, Kirjnerwarned.Finally, an Internet startup late on Monday publicly calledinto question Facebook's user-number claims, igniting debateamong industry executives and on the Internet.A commerce site called Limited Run, in announcing that itwas deleting its Facebook page, claimed that 80 percent of itsad-clicks on Facebook came from "bots" or automated accounts,and only a fifth from genuine users."We're currently investigating their claims," said anexternal spokeswoman for the social network. (Reporting By Gerry Shih; Editing by Alden Bentley and RichardChang)