The stock market rallied Monday, but Facebook’s shares sank in the first day of trading without the full support of the company's underwriters, leaving some investors down 25 percent from where they were Friday afternoon.
Facebook's debut was beset by problems, so much so that Nasdaq said on Monday it was changing its IPO procedures. That may comfort companies considering a listing but does little for Facebook, whose lead underwriter Morgan Stanley had to step in and defend the $38 offering price on the open market.
Without that same level of defense, its shares fell 11 percent from Friday's intra-day high of $45 a share, closing just above $34.
"At the moment it's not living up to the hype," Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago said, adding that some people may have decided to hang back and buy the stock on the declines.
"Look at the valuation on it. It might have said 'buy' to a few people, but boy it was awfully rich," he said.
The losses wiped some $19 billion off of the company's market capitalization -- not far from what Chief Executive Mark Zuckerberg was worth personally when the stock debuted.
Volume was again massive, with more than 96 million shares trading hands in the morning session alone, making it by far the most active stock on the U.S. market. Nearly 581 million shares were traded on Friday.
"One of the things that we are seeing in Facebook is a lot of emotional trading, in that over the weekend much of the media coverage was negative, and that could be weighing on investors' decisions to get out of the stock," said JJ Kinahan, TD Ameritrade's chief derivatives strategist.
The drop was so steep that circuit breakers kicked in a few minutes after the open to restrict short sales in the stock, according to a notice from Nasdaq.
Shares in other one-time Internet darlings fell in lockstep with Facebook on Monday, with Yelp, LinkedIn and Zynga all lower.
As Facebook fell, there was a long list of questions -- ranging from whether the underwriters priced the shares too high to how well prepared the Nasdaq was to handle the biggest Internet IPO ever -- and few immediate answers.
"It was just a poorly done deal and it just so happens to be the biggest deal ever for Nasdaq and they pooched it, that's the bottom line here," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The broader market fared better. The Dow Jones industrial average close the day up 135 points.
Nasdaq said Monday morning the changes it was making would prevent a repeat of what happened Friday, when glitches prevented some traders from knowing for hours whether their trades had been completed.
The exchange also said it would implement procedures to accommodate orders that were not properly executed last week, which could ultimately lead to compensation for some investors.
"It doesn't instill confidence for clients. Talk about trying to convince them it isn't a casino," one Midwestern financial adviser told Reuters on Monday.
Separately, a source said Morgan Stanley's brokerage arm still had a "large number" of share orders from Friday that were not confirmed, which it was working to resolve.
A Facebook spokeswoman declined to comment on the share price issue.
But analysts said that after the initial frenzy, investors were quickly becoming cautious about the stock.
"Investors are increasingly aware of the risk embedded in the stock price. There are real concerns about growth and advertisers' frequent lack of certainty how best to use Facebook, along with rising costs and ongoing acquisition risk," said Brian Wieser at Pivotal Research Group, who has a $30 target on the stock.
"At $38, the stock is priced for perfection in a manner that implied that risks were negligible."
In earnings news, Lowe's Cos Inc, the world's second-largest home improvement chain, cut its fiscal-year earnings outlook and said demand slowed toward the end of the traditionally strong first quarter.
Yahoo shares rose after news that Chinese Internet entrepreneur Jack Ma is buying back up to half of a 40 percent stake in his Alibaba Group from Yahoo for $7.1 billion in a deal that moves the Chinese e-commerce leader closer to a public listing.
Reuters contributed to this report.