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Facebook has been hammered by the stock market after pricing its May 18 IPO at $38 and suffering an 18.4 percent drop through May 22. Unfortunately for buyers, a look at other big-ticket offerings of the Internet age suggests that long-term strength might be correlated to an initial pop on day one. “We view shares being priced for perfection,” says Pivotal Research Group’s Brian Wieser, who initiated coverage of Facebook with a “sell” rating and a $30 price target. Investors looking for the next Amazon.com might be disappointed, since Facebook was a more mature company, with $4 billion in annual revenue and an already rich $104 billion valuation at its IPO price.
FACEBOOK’S UNLIKELY MILLIONAIRES
Bono: The IPO riches attributed to U2’s Bono have been wildly exaggerated. His Elevation Partners invested $210 million in Facebook in 2009 that was worth $1.5 billion at the $38 IPO price. But after he splits the money with partners and pays off clients, the rocker’s stake is just $43 million.
David Choe: In 2007, graffiti artist Choe was commissioned by Zuckerberg to paint murals on Facebook’s offices. He wisely opted for pre-IPO shares as payment instead of a reported $60,000 fee. The shares were worth $200 million the day of the IPO.
Priscilla Chan: Zuckerberg and Chan were married May 19, the day after Facebook began trading. Under California law, should the two divorce, Zuckerberg’s $25 billion stake at the time of the IPO would be considered his sole property. About $2 billion in stock options, though, could be community property.
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