(CBS/AP) NEW YORK - Facebook's (FB) stock price closed its second day of trading at $34.03, down nearly 11 percent and well below the company's $38 per share price for the company's initial public offering on Friday.
Investors and technology industry watchers are closely tracking the Menlo Park, Calif.-based company's shares. The world's largest online social network was one of the most anticipated initial public stock offerings ever, and now serves as a bellwether for other social media companies.
"There must have been some sober second thoughts about this," said Brian Wieser, an analyst at Pivotal Research Group who was first to come out with a "Sell" rating on Facebook's stock.
It's not that he thinks Facebook is a bad investment. But at $38 per share, it's just too expensive for the amount of risks associated with what's still a young company with an unproven advertising model, he says. His fair price, or "target price," is $30.
Facebook's market debut Friday suffered some hiccups, with trading on the Nasdaq delayed for a half hour and issues with traders' orders. The stock closed Friday just a few cents above where it priced Thursday night, when many investors had hoped for a big first-day pop. The shares opened Friday at $42.05, and fluctuated throughout the day before closing at $38.23.
Wedbush analyst Michael Pachter, who came out with an "Outperform" rating on Facebook before its IPO, said he thinks the underwriters overestimated demand for the company's stock. Last week, the underwriters, led by Morgan Stanley, increased the offering price range. On Wednesday, Facebook's early investors and other stockholders increased the number of shares they were selling in the IPO. Both had seemingly been signals that there was strong demand for shares.
"The late addition of 84 million shares to the offering overwhelmed demand, limiting the first day price," Pachter said in a note to investors.
On Monday, Facebook Inc.'s stock fell $4.20 to $34.03 in late morning trading. Shares dropped as low as $33 earlier.
Shares of some related social media companies also declined Monday. Social gaming company Zynga Inc. (ZNGA), which makes FarmVille, CityVille, and Mafia Wars, and gets the bulk of its revenue from Facebook users, fell 4 percent to $6.36 in intra-day trading, its lowest level since the San Francisco company's December IPO. The company's stock made up ground later in the day to close at $7.09, down less than 1 percent. LinkedIn Corp. (LNKD), a social network for professionals, dropped 2.2 percent to finish at $96.84.