<story><title>Facebook sinks to record low, 43% below IPO price, as doubts grow</title><url>http://www.cnbc.com/id/48426298</url></story><parent_chain><item><author>tedsuo</author><text>Could someone explain, how the low stock price is bad for Facebook?  They are profitable, so they aren&apos;t going to go bankrupt.  And they made a lot of money on the IPO, arguably more than they should have.  Doesn&apos;t this mean the joke is on everyone &lt;i&gt;but&lt;/i&gt; facebook (the company, not including the stock-owning employees)? Through what mechanism does it come back to bite them?  Not defending them, just uneducated on this side of business.</text></item></parent_chain><comment><author>ChuckMcM</author><text>Well in the valley its hard to use stock incentive stock options as a lure if the stock price is going down. That can force you into giving out stock &lt;i&gt;grants&lt;/i&gt; and those have their own set of annoyances.&lt;p&gt;If your stock is going down you are less able to raise capital by doing a private placement (basically a pre-planned sale to fixed investors kind of like Zynga did and is currently being sued for) Anytime a company sells a large amount of stock, and then the stock continues to go down, a number of law firms will file lawsuits.&lt;p&gt;Perhaps most importantly your &apos;buying power&apos; is reduced. If you notice there are a lot of &apos;acquihires&apos; going around. Those can be done &apos;all stock&apos; when the stock is strong but require &apos;cash and stock&apos; or worse &apos;all cash&apos; when the stock is weak. So if Facebook wants to continue to gobble up things like Instagram is can&apos;t go into a deal with &quot;Hey, its a billion dollars, uh today, perhaps on Friday it will be 800 million.&quot; [1]&lt;p&gt;[1] Yes, I know its more complicated than that but I simplify for brevity.</text></comment>
<story><title>Facebook sinks to record low, 43% below IPO price, as doubts grow</title><url>http://www.cnbc.com/id/48426298</url></story><parent_chain><item><author>tedsuo</author><text>Could someone explain, how the low stock price is bad for Facebook?  They are profitable, so they aren&apos;t going to go bankrupt.  And they made a lot of money on the IPO, arguably more than they should have.  Doesn&apos;t this mean the joke is on everyone &lt;i&gt;but&lt;/i&gt; facebook (the company, not including the stock-owning employees)? Through what mechanism does it come back to bite them?  Not defending them, just uneducated on this side of business.</text></item></parent_chain><comment><author>drgath</author><text>At $22, they are just fine.  But if it continues to drop, then you will start to see some changes at FB as they have to free up high operational expenses. If it goes sub-$15, then they&apos;ll start making some tough decisions.&lt;p&gt;Edit: So based off the downvote, either someone didn&apos;t like my lack of explanation, or it Zuck is lurking on HN.  I&apos;m guessing the former, so I&apos;ll explain.  FB&apos;s value is so heavily tied to future growth expectations.  Current P/E is 116, and compare that to a peaked out company whose P/E is more typically between 10-20 (see: YHOO, GOOG, APPL, ADBE, ORCL).  If FB gets to $15, it&apos;s a P/E of 82, $10 = P/E of 55, $5 and you have 27.  At $5 and its current earnings, FB is basically toast as an &quot;innovative&quot; company.  So, I say a &quot;sub-$15&quot; value above because once it gets to that point this quickly after the IPO, dropping into single digits has to be a possiblity they consider.  They won&apos;t have billions of dollars at their disposal to do whatever they please and will have to be more judicious in their spending.&lt;p&gt;P.S. I&apos;m a programmer, not a finance-guy, so please correct me if I&apos;m wrong about something.</text></comment>