Since Facebook's (Nasdaq: FB) hugely hyped and highly anticipated initial public offering on May 18 at $38, shares have been sliced in half, hitting a low of $19.01 in trading today (Friday).
Now, chatter is swirling that CEO Mark Zuckerberg should step down and let a more experienced executive take the helm.
"There is a growing sense that Mark Zuckerberg, talented though he may be, is in over his hoodies as CEO of a multibillion-dollar public company," Sam Hamadeh, head of research firm PrivCo, told the Los Angeles Times. "While in many cases a company founder can, and does, grow into the job, things are happening so quickly that there is precious little time here for Zuckerberg to do that."
Fueling the sentiment is Facebook's steady descent since its calamitous IPO. On Thursday, as the first lockup period ended, which allowed early investors and venture capitalists to unburden their portfolio of battered shares, the stock hit a fresh low.
Facebook's shares closed Thursday at $19.87, a far cry from its debut price and peak of $45 a share.
What's Next for Zuckerberg?
The immediate question now is where do the weak Facebook performance and outlook leave Zuckerberg?
Aside from a lighter bank account (his net worth has lost some $7 billion since Facebook's IPO but is still tallied at about $10.2 billion), Zuckerberg's days as CEO could be numbered.
Zuckerberg's real talent, finesse and effectiveness is in inventiveness and ingenuity. He and the company's future would be better off allowing someone more experienced run the corporate operations and address existing and potential investors.
Known for casual attire, hoodies and sneakers being his trademark look, Zuckerberg has shown disregard for the corporate world, a universe Facebook desperately needs in its corner.
"His behavior is what I would expect of someone his age-the hoodies and everything else. He's trying to appeal to his audience instead of being responsible to his investors. His job now is to run the company," Dan Alpert of New York investment bank Westwood Capital told the LA Times.
Even more important than his wardrobe is Zuckerberg's ability to instill confidence in investors – something presently non-existent.
"The market is not convinced of Facebook's future," David Kirkpatrick, author of "The Facebook Effect" told Bloomberg News.
Kirkpatrick said that Zuckerberg most likely isn't concerned about the diminishing value of his own stake in Facebook. "He thinks of it only in terms of how it affects the company's strategic and tactical opportunities. "
Since the IPO, Zuckerberg has expressed little interest in his wealth and Facebook stock holdings. He has encouraged his employees who have been granted generous stock options to adhere to the same mantra and focus instead on developing Facebook and its products.
Thursday, as nearly 271 million shares were freed in the first lockup ending, Zuckerberg posted a picture on his Facebook profile saying "stay focused" and "keep shipping."
Perhaps Zuckerberg is a tad more sensitive than given credit for. According to a report from The Telegraph, sources at Thursday's Facebook staff meeting, which was designed to boost morale, said the CEO admitted the stock's slide is "painful" to watch.
Since Facebook's fall from grace is not all Zuckerberg's doing – Nasdaq and underwriters share some blame – investors could be flexible on how long they give him to turn around the falling share price.
One way to deliver investor relief would be to develop better growth prospects.
"Is it possible that management could improve those prospects? Maybe, but I don't think it's a sure bet. Zuckerberg appears to be a decent guy who the market should give a little bit longer to prove his mettle," Alpert commented.
Can Facebook Stock Ever Recover?
Facebook's abysmal performance, if it doesn't change course, could label it the worst performing IPO ever.
"This was the most anticipated IPO in many years and it was like an exploding cigar," Barry Ritholtz, head of research firm Fusion IQ, told the LA Times. "Every investor thought they were about to become wealthy beyond their wildest dreams, and they had this blow up in their face."
Several times before the actual offering, eager underwriters raised the number of shares to be sold and the price range. Many viewed the move as a way for underwriters, the social networking giant itself and big shareholders to benefit at the expense of ordinary investors. Valued at a whopping $100 billion, Facebook shares were priced for perfection, leaving little room for any missteps.
Yet, nothing but missteps followed.
The greater risk presently looming is that the sinking stock price could associate the company with a "stink of failure" that could sway advertisers away from using Facebook, Ritholtz noted.
Facebook stock was trading around $19.14 at 2:30 p.m.
Related Articles and News:
- Money Morning:
The Facebook IPO Facts: The Good, The Bad and The Ugly
- Money Morning:
Another 1.7 Billion Reasons to Avoid Facebook Stock
- Bloomberg News:
Zuckerberg Fortune Drops $600 Million as Facebook Flops
- Los Angeles Times:
Is Mark Zuckerberg in over his hoodie as Facebook CEO?
- The Telegraph:
Mark Zuckerberg admits Facebook stock tumble is "painful" to watch.