Facebook shares tumbled 10 per cent to an all time low of $28.65 on Tuesday as nervous investors fled the company's shares, concerned about the social network's long term business prospects and an initial offering price that proved too rich, Economic Times reports.
Since its market debut on May 18, the eight year old company has shed approximately $25 billion in value roughly equivalent to the market capitalization of Morgan Stanley, the lead underwriter of Facebook's IPO.
Bloomberg says that about $25 billion in market value has been erased from Facebook as bearish sentiment built in stock and options markets after the social networking site went public while U.S. equities headed for the biggest monthly decline since September. The company, its underwriters and Nasdaq OMX Group Inc. (NDAQ) were sued last week by investors who say they lost money in the IPO. June $30 puts were the most active contracts, with volume at 23,723. They were followed by June $34 calls and June $32 calls.
Wall Street has harbored concerns that Facebook, while boasting nearly a billion users worldwide and dominating Internet social networking, would have difficulty translating its growing presence on smartphones and other mobile devices into revenue. Rivals Google Inc and Apple Inc are currently more dominant in the mobile arena.
The increasing urgency of Facebook's quest to monetize mobile is spurring widespread speculation over its next moves. Technology bankers say the company will benefit from tacking on mobile operating software through an acquisition of Norway's Opera, which has been on the auction block for a while.
The New York Times also cited sources dredging up a longstanding rumor that Zuckerberg was pondering building a Facebook phone, with the new wrinkle that an easy way to acquire the hardware expertise needed was to buy troubled Research in Motion.
Analysts say apart from the challenge of earning money off smartphone and tablet users, Facebook which relies on advertising for the majority of its revenue may also find it difficult to lure large advertisers.