Did Facebook Ignore This BIG Warning?
The U.S. Securities and Exchange Commission had questioned Facebook (NYSE:FB) on the value of the company’s initial stock offering and pressed it to give additional details on how the growing tendency of users to access the social network through mobile devices would affect its profitability, according to documents released on Friday.
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The fair price of Facebook’s stock was discussed with the SEC on April 25, and the company’s last correspondence with the regulatory body took place on May 15, according to Bloomberg. The same day, Facebook increased the opening price range of its stock to between $34 and $38 per share, up from the previous estimation of $28 to $35. The company eventually set the price at $38 per share, making it more expensive than almost every company in the Standard & Poor’s 500 Index.
According to the documents, the social network had justified its price range to SEC by saying that it was not “meaningfully different” from the $30.89 per share fair value estimate it made earlier this year. It also told the agency that estimates of its fair value ranged from $25.54 in March 2011 to $30.07 in September.
The SEC also asked Facebook about its May 9 amendment to the company’s IPO filing that expressed concerns about mobile revenue. “Assuming that the trend toward mobile continues and your mobile monetization efforts are unsuccessful, ensure that your disclosure fully addresses the potential consequences to your revenue and financial results rather than just stating that they ‘may be negatively affected,’” the agency wrote to the company.
Facebook stuck to its high price to raise $16 billion from its May 17 IPO, but since then, its shares have fallen dramatically, dropping 26 percent in value through the end of Thursday.
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