Why Facebook's Falling Share Price Really Doesn't Matter

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Facebook PriceOn Monday, Facebook's stock fell from its IPO price of $38 to a low of (as of this writing) $33.60.

So what?

As outlets from The Wall Street Journal to MSN breathlessly reported, Facebook's (FB) official value lost about $12 billion over the weekend, and CEO Mark Zuckerberg is now worth about $2 billion less than he was on Friday.

Again, so what?

With investors across the world screeching like drenched cats and headlines questioning whether or not the social network is already headed down the drain, some critics have assumed that Mark Zuckerberg and company are quaking in their boots. However, nobody who actually paid attention to Facebook's statements before the IPO should be surprised by this latest turn. Long-term investors should postpone the worrying until some actual news surfaces; in the meantime, Facebook will sweat off the short-term investors and settle in for the long haul.

As part of his company's IPO, Mark Zuckerberg wrote a letter to potential stockholders, laying out a vision that sounded less like a business proposal and more like a vision for remaking society. In it, he talked about opening up communication, taking big risks, being bold, and maximizing his company's impact. It was an interesting letter, full of exciting ideas, but for short-term investors hoping to make a quick buck, it was missing one key aspect: a promise of huge returns.

Like most of Zuckerberg's moves, the letter was deliberate and thoughtful. He has made no secret of his lack of interest in selling stock in Facebook; in fact, were it not for SEC rules, chances are that Facebook would still be privately held. And, to be fair, it's easy see why anybody who is interested in the long-term health of a company would want to avoid putting it in stockholders' hands: If the past decade has taught one lesson, it's that the stock market operates on short-term gains and losses, not on far-reaching plans.

And Zuckerberg's plans are nothing if not far-reaching.


Ultimately, Wall Street's squeals about the price of Facebook stock are largely meaningless. Zuckerberg controls 57% of Facebook's voting power, which means that investors looking for a say in how the company is run might consider applying for a job there -- they're certainly not going to carry a lot of voice at shareholder meetings. But for those who are interested in holding onto the stock for a long time, there isn't any cause for worry: If Zuckerberg's tenure has shown anything, it's that he is a smart, dynamic leader who knows how to make his company grow.

Given its current path, Facebook is poised to remain at the forefront of social media for the foreseeable future. In other words, for those holding a few shares of the stock -- and, better yet, for those who will buy a few shares after the quick sale folk run for the hills -- Zuckerberg and company promise to be a good place to trust their money.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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Ian

I suppose one would care if they invested money to buy shares in this turkey.

June 11 2012 at 10:42 AM Report abuse rate up rate down Reply
dukebballfan2011

I think that Facebook should have been priced at about $22. When you consider the company only makes revenue off ads. that aren't even on mobile device apps. and that their actual earnings over the past 8 years are over 25 times lower than they are valued at, it is obvious why most consider them such a risk! I have a website that has addressed Facebook and its surrounding social media sites fairly in depth over the past few days. It is DayTradingUpdates.com. Looking at this now is risky, but when you look at a site like Pandora, which is boosting more members than even, has revenue coming in from different facets, I believe it is a better media buy. I bought it and had a 11% increase on it shortly after this week and I don't think it is nearly close to finished! For more updates please visit my site.

May 25 2012 at 2:16 AM Report abuse rate up rate down Reply
Dan Schmitt

This article is irresponsible and makes me think the author is either ignorant to reality or somehow had his ethics compromised by a third party influence.

May 23 2012 at 1:19 PM Report abuse rate up rate down Reply
Dee

like Ray replied I am amazed that a mother able to profit $4635 in 1 month on the computer. did you read this page NuttyRich.com

May 23 2012 at 12:44 PM Report abuse rate up rate down Reply
Gumby

Snobs are still welcome to join Facebook and get connected!

May 23 2012 at 12:26 PM Report abuse rate up rate down Reply
Gumby

Many whose names I knew didnt join Facebook probably becasue they are homeless, lonely, forgotten.. Facebook is a open connected world that anyone can come and join. This is the real purpose of Facebook.

May 23 2012 at 12:24 PM Report abuse rate up rate down Reply
Gumby

I found my old schoolmates at Facebook! Have you?

May 23 2012 at 12:23 PM Report abuse rate up rate down Reply
little.hiti

@Bruce Watson : seriously? doesn't matter ? Watch the exodus from MS, firings mainly. The small guys who put in < $ 100 million will get it hard. This screws the IPO market for companies with genuine chances of offering something real. This debacle will matter in the short term , mid-term and long-term.

I know there is freedom of expression .... but what is expressed here is very dumb not useful for anything. Its a waste on internet bandwidth.

May 23 2012 at 8:55 AM Report abuse rate up rate down Reply
David

ITS EASY FOR YOU TO SAY FACEBOOK FALLING SHARES DOESN'T MATTER,YOU WOULD PROBABLY SAY THE SAME THING ABOUT OUR NATIONAL DEBT,JUST SHY OF REACHING THE 16 TRILLION MARK......THAT DOESN'T MATTER EITHER....WHAT DOES MATTER TO YOU?

May 23 2012 at 8:36 AM Report abuse rate up rate down Reply
Wwhatever747

FB (Facebook) - Featured Result
www.dailyfinance.com/quotes/facebook/fb/nas

31.00-3.03 (-8.90%) May 22 4:00PM EDT

May 23 2012 at 2:45 AM Report abuse rate up rate down Reply