So it’s obviously NOT good when one of the lead underwriters of your IPO cuts the price target on the company they took public. And that’s just what happened to Facebook, as Morgan Stanley’s Scott Devitt cut his price target for Facebook to $32. It was nice of him to outline the best and worst case scenarios though:
In the best-case scenario, shares would trade at $38, he said. In the worst case, he thinks shares could trade as low as $17, below current levels. That would occur if its new ad formats don’t gain traction with advertisers, he said. (WSJ)
I’m assuming the new ad formats he’s talking about are those “sponsored stories” you see in your Facebook timeline. Which are amazingly said to generate about $1 million per day in revenue even in limited testing. That’s a lot of money. And then there’s talk about a “want” button coming along. Still though, Facebook suffers from the people don’t go on Facebook to buy stuff.
But $17 a share as the low for Facebook is not that far off. Today Facebook traded down past $18, hitting a new 52 week low 17.55. Oh how what a waste of time all that Facebook hype and IPO roadshow turned out to be.