Facebook Slump Continues After Two Senior Executives Exit
Facebook Inc. (FB) dropped 4 percent to a record low, the fifth straight day of declines after the world’s largest social-networking service reported earnings that showed slowing growth.
The shares slid to $20.04 at the close in New York. Earlier the stock fell as low as $19.82, the lowest intraday price since the company held an initial public offering on May 17. Shares of the Menlo Park, California-based company have lost 47 percent since the IPO.
Senior executives Katie Mitic and Ethan Beard said yesterday that they’re leaving Facebook to pursue other opportunities, bringing to three the number of high-profile management departures since the IPO. The exits compounded investor concerns about Facebook’s prospects for growth as sales and user expansion slowed in the second quarter, said Martin Pyykkonen, an analyst at Wedge Partners Corp.
“You need some demonstrated execution that is more evident and shows the revenue growth that you can pull out of this user base,” Pyykkonen said.
Facebook, which hasn’t closed above the $38 IPO price since its first trading day, on July 26 reported second-quarter sales growth of 32 percent, down from 45 percent in the previous three months.
Google Inc. (GOOG)’s first earnings report as a public company in 2004 set a high bar for Facebook to reassure investors, said Pyykkonen. “It grew leaps and bounds before anybody could take their foot off the gas pedal,” he said.
Revenue for the search-engine operator more than doubled in the third quarter of 2004, sending Google’s shares up 15 percent the following day. Facebook dropped 12 percent the day after its results came out.
Facebook’s post-IPO slump may cost California “hundreds of millions of dollars” in revenue expected from taxes on capital gains if the lower stock prices persist through the end of the year, the state’s fiscal analyst said.
“Facebook share prices have fallen far below levels assumed in the state’s revenue projections,” the nonpartisan Legislative Analyst’s Office said in a report yesterday.
The most populous U.S. state’s $91.3 billion budget, signed by Governor Jerry Brown in June, counted on $1.9 billion in income-tax revenue when company insiders such as Chief Executive Officer Mark Zuckerberg exercise options, assuming a per-share price of $35.
Bret Taylor, Facebook’s former chief technology officer, said in June he was leaving. Facebook’s Mitic, former director of platform marketing, will work at a mobile startup. Beard, head of platform partnerships, is starting his own venture.
-- Editors: Lisa Rapaport, Jillian Ward
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