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Facebook Shares Tumble By 13% On Second Day

(c) Sky News 2012

Facebook shares dropped by more than 13% on their second day of trading.


The shares dropped below their debut price of $38 (£24) in early Wall Street trading, at one point falling to $33 (£21) - down 13.7%.

They began to rise as the day progressed. The shares ended their first day, Friday, flat, despite an initial surge to $43 (£27).

The fall has raised concerns about the value of the stock should its lead underwriter, Morgan Stanley (EUREX: DWDF.EX - news) , stop propping it up.

There are also fears that investors, hoping for a surge in price, decide to pull out.

The company has a host of high-profile investors, including Apple (NasdaqGS: AAPL - news) co-founder Steve Wozniak and U2 frontman Bono, and more than 500 million shares exchanged hands on the stock's first day of trading.

There was some speculation after Facebook's stockmarket debut on Friday that its IPO (Initial Public Offering) partner, Morgan Stanley, was buying shares itself to keep their value above the opening price of $38.

A spokesman for Morgan Stanley would not confirm or deny this strategy when asked by the Wall Street Journal.

Analysts have suggsted that short traders - who make a profit from falling share prices - have been trying to capitalise on Morgan Stanley's actions and that the bank has stopped intervening to discourage them from doing so.

Shares in other recently floated technology companies such as LinkedIn, Groupon and Zynga were dragged lower by Facebook's performance but the wider Nasdaq (Nasdaq: ^NDX - news) index of technology shares rose.

Meanwhile the Nasdaq exchange has apologised that a glitch in its system affected trading in newly-issued Facebook shares on Friday.

The US stock exchange is planning to revamp its technology systems that handle IPOs after trading in Facebook shares was delayed by half an hour as the company went public and investors were left unaware for hours as to whether their buy and sell orders had been executed.

With shares at $38 (£24) a piece, the company was valued at $104bn (£66bn) on Friday, making it more valuable than Amazon, Disney (NYSE: DIS - news) , McDonalds or the Ford Motor Company.

Facebook has more than 900 million active users globally who log in at least once a month. But the firm makes only a tiny proportion of its income from its users - mainly through advertising.

The founding of the social networking site by Mark Zuckerberg in a Harvard dorm room was made into a film in 2010.