Facebook shares down 4.3 percent after BMO releases a dissuading report

Facebook stock continues to plummet. Traded as FB, the share hit an all-time low midday Friday at $18.25, 4.3 percent down from the previous day. The initial public offering was $38 in May this year and so far the price has gone down almost half of the face value, 52 percent to be exact.

The main reason for the stock’s dip on the graph was a report issued by BMO Capital Market on Friday. The company showed a negative trend in Facebook’s stock in the coming days and stated that the price will keep on sliding until the Social Network brings a new marketing and advertisement strategy.

Concerns are raising over Facebook’s advertisement strategy—its main source of income. Although the department is making hefty revenues from online adverts on the site, it is not enough on two counts.

First, the company is now public and $4 Billion in revenue (not profit) is not enough for investors to go for a $38 share in the market. Second, the social networking platform is now mostly being accessed through mobile devices like smartphones and tablets in the US—the biggest market so far.

The mobile usage has become a advertisement nightmare for Facebook, Google and Apple, as it becomes next to impossible to tap the grey area due to limitations on mobile apps and interfaces. Moreover, advertisements’ face (banners and slides) have very small face area on smaller tablet and smartphone screens. The lack of Adobe Flash player on iOS devices is another hurdle.

Last month, Starbucks’ advert caught dust on iOS devices because of the lack of Flash Player.

Another concern raised by BMO is share lockups over the next year. Word is getting stronger on street over share expirations as the initial lock-up phase expired on August 16. The next phase is expected in mid-October when the company launches 243 million shares. The big lock-up is scheduled on November 14 when 1.2 Billion shares will be released.

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Posted by Usman Khalid on Sep 1 2012. Filed under Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.