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Collateral damage mounts after Facebook IPO

A Facebook logo is seen through the windows of the NASDAQ stock exchange as people walk by on Times Square in New York, May 17, 2012. Lots of companies were counting on the social network to boost their fortunes when it went public. Just the opposite happened.

Kai Ryssdal: Facebook. Faceplant. Facerip. I could go on, but it seems unsporting after the IPO, shall we say, failed to meet expectations Friday. Shares were off just shy of 11 percent today -- $34.03 -- that's down just about four bucks off the IPO price.

It was priced wrong. Glitches on the Nasdaq keeps prices too low. Mark Zuckerberg should have worn a tie. You name it. It could be days before everything's sorted out, and the collateral damage is piling up.

Marketplace's Queena Kim reports.


Queena Kim: Rick Summer is an analyst at Morningstar. He says that with all the hype around Facebook, it seems to have become a leading indicator of all of things consumer-oriented in tech.

Rick Summer: This is the mother of all social networking companies. it really has defined what Silicon Valley is today around Internet companies/content companies with a social component to it.

The effect? With Facebook’s stock diving, investors started to question other tech companies that went public in the last year or so. Earlier today, shares of Linkedin and Groupon -- which have little or no business with Facebook -- took a dip, although eventually they bounced back.

The biggest casualty was the social gaming site Zynga, which draws a significant chunk of its revenue from Facebook.

Summer: Because of that I think there are a host of people or a host of firms that may blindly associate these two together and assume they’re highly correlated business.

Summer says the number of Zynga’s Facebook players probably hasn’t changed radically since Friday. But some other fortunes clearly have.

Michael Pachter is an analyst with WedBush Securities. He says Morgan Stanley, the lead banker on the Facebook IPO, botched the deal by putting too many shares on the market. That spooked investors.

Michael Pachter: Look, the idea that it’s trading at $33 to $34 today, it tells you that the original buyers are cutting their losses and getting out because they don’t understand it.

But Pachter says it would be mistake to think that because Facebook’s IPO is a failure, social network is a failure.

I’m Queena Kim for Marketplace.

About the author

Queena Kim covers technology for Marketplace. She lives in the Bay Area.

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