When Facebook first listed on May 18, its shares opened at just over $42, meaning that on that first day of trading it was briefly valued at $104bn, amazingly more than the combined value of Nike and Goldman Sachs. However, today the bubble seems to have well and truly burst as Facebook hit a new milestone, not one they will be celebrating for sure, as the stock went down below $20 per share.
Perhaps one major factor in the current value of Facebook is related to marketing revenue. Latest estimates by the social network reveal they suspect more than 83m of active accounts are fake. This disclosure came as their share value dipped below $20 on Thursday.
Quarterly filing with the Securities and Exchange Commission (SEC) revealed that as many as 8.7% of Facebook’s 955 user accounts may possibly be fake and as many as 5% of active accounts duplicates of a main user account.
Facebook says in the filing “While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products across large online and mobile populations around the world.”
Facebook clearly state that duplicate accounts, i.e. people who have more than one profile is a violation of Facebook policy, however, this doesn’t appear to have been a deterrent as it is suspected these duplicate accounts made up 4.9% of “fake” accounts as of 30 June 2012. Additionally, the firm has stated 1.5% appear to be spam accounts.
A concerning fact for Facebook was revealed by Limited Run, a firm setting up online stores for labels, musicians and artists. Limited Run alleged its custom built “page logger” has identified that 80% of clicks on its adverts on Facebook originated from fake “bot” accounts.
Pivotal Research Group analyst, Brian Wieser said that bots are not new news and that Facebook “clearly did a poor job of managing investor relations” at the time of its IPO. However, he followed up by saying it was not all bad news as some investors were clearly overlooking good news and highlighting recent bad news. “Expectations are completely out of whack with the fundamentals. It’s as if people are disappointed with the US basketball team for not getting Olympic gold in swimming” he said.
On 18m May, the world saw the launch of Facebook shares in a blaze of publicity, though since then the share sale has proved a costly embarrassment for not only the company, but for investors and the banks that supported it. Within two weeks of the launch, shares fell below the $30 mark and have been on a continual slide since.
The collapse of the share price and the rather messy debut on NASDAQ has spurred a series of lawsuits, with a number of investors subsequently suing Facebook, its bankers and the stock exchange. US authorities are also reported to be looking at the IPO and allegations surrounding some shareholders being warned ahead of others of the firm’s concerns about its mobile business.