Facebook sinks to record low as doubts grow

Tue Jul 31, 2012 4:10pm EDT
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By Gerry Shih

SAN FRANCISCO (Reuters) - Facebook Inc's shares slid 6.2 percent to another record low on Tuesday, diving for the third straight day since lackluster results showed decelerating user growth and revived doubts about its ability to sustain its rich valuation.

A sobering report from Bernstein Research, combined with online chatter about the potential proliferation of automated Facebook accounts and a looming sell-off of employee shares next month all conspired to rock the stock, analysts say.

Facebook has lost more than 40 percent of its value since becoming on May 18 the first American company to debut with a value of more than $100 billion.

The stock, down 6.2 percent at $21.71, still trades at more than 40 times forward earnings, versus Google Inc's 15.

Investors have punished the stocks of the No. 1 social network and other consumer-focused Internet companies such as Zynga Inc, questioning their ability to sustain growth and maintain lofty valuations.

Last week, Facebook reported results but offered no outlook or forecast for the year, disappointing investors who had hoped for affirmation of its growth prospects.

Wall Street is also bracing for a potential deluge of hundreds of millions of shares after August 16, when Facebook employees can sell their company-awarded shares for the first time.

"It's a combination of the Bernstein note, and partly complaints about the Facebook bot. Lockups are also causing pressure on shares today," said analyst Herman Leung of Susquehanna Financial Group, which owns and is a market maker in Facebook shares.   Continued...

The Facebook logo is seen on a screen inside at the Nasdaq Marketsite in New York May 18, 2012. REUTERS/Shannon Stapleton