Business

‘Crashbook’ slide scares investors

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Facebook is in freefall, and Wall Street is sounding the alarm bells as even the social network’s earliest backers cash in their crumbling shares.

The company’s stock hit another low yesterday with shares trading at less than half the value they were when Facebook went public in May.

Shares of the social network giant slipped 5.4 percent to close at $18.06.

The shares are coming under pressure not only from external forces — Wall Street analysts taking down their estimates of future revenues — but also from the inside.

Employees, board members and early investors — like Peter Thiel and co-founder Dustin Moskovitz — are selling their shares, giving Main Street pause.

The shares dived earlier this month after a first lock-up period expired. A second expiration date is looming in November.

Stifel Nicolaus analyst Jordan Rohan told investors that at Facebook’s depressed share price the stock is starting to look attractive, but that sentiment is working against the stock.

“Selling by key insiders/[venture capitalists] has set a precedent for other sponsors and employees to sell heavily below $20 per share,” Rohan wrote in a note to clients.

“We believe the period of indigestion may continue as more shares come to market, limiting the positive reaction to growth initiatives,” he added.

BMO Capital Markets lowered its target price from $25 to $15, seeing slower revenue growth than expected.

The warning came on the heels of an eMarketer report that lowered its ad revenue forecast for the company from $6 billion to $5 billion this year.

Facebook’s revenue slowdown has been closely tracked since the company opened its books to Wall Street ahead of its public debut.

Analysts working for the banks that acted as underwriters in the IPO, including Morgan Stanley and Goldman Sachs, revised revenue projections downward just days before Facebook started trading publicly.

In November, another 1.5 billion shares will be eligible for sale, and until those lock-ups pass, most analysts are advising to stay away.

Still, prominent Apple analyst Gene Munster, with Piper Jaffray, said this week that Facebook’s stock could rise to $41.

At Merrill Lynch, analysts cut their price target to $23, expecting more insiders to follow the lead of Thiel and Moskowitz and bail when they are free from lock-ups.

There have been reports that Facebook share price is finally influencing CEO Mark Zuckerberg, who has addressed the issue with concerned staff.

Facebook is not the only once-mighty tech company to stumble on the public markets.

Groupon also hit new lows yesterday. Then came word that Chairman Eric Lefkofsky transferred 18.7 million Groupon shares, valued at $77.6 million, to early investors, consultants and advisers, Bloomberg reported.

The daily deals company closed at $4.15, a far cry from its $20 -a -share IPO price.

Also, Zynga, which has been facing a talent exodus, went public at $10 and shares closed at $2.80 yesterday.