Facebook shares drop 12% in aftermarket

The much hyped Facebook offering that hit the markets at US$38, suffered a little rain on it's parade yesterday, as the share price dropped 12%, to sit around US$34 on a day when the US stock market was reasonably well supported.

This has led to finger pointing over the initial valuation, some considered to be on the high side anyway and critiscism over the role played by Morgan Stanley, the lead underwriter in the massive US104 billion IPO (Initial Public Offering). 

Quite late on, Morgan Stanley increased the value of the shares on offer by 25% and raised the price range also.This has caused many applicants to receive substantially more shares than they anticipated receiving, as orders can be proportionately scaled down, if the IPO was massively oversubscribed.

These shares would have been sold in the early market, so instead of seeing a well supported after market for Facebook shares, there was a flood of selling instead.

The feeling is that the IPO was mishandled and overpriced.