Elevation slightly less elevated on Facebook

Nasdaq glitches, weak forecasts and an investor lawsuit have plagued social media giant Facebook in the days following its blockbuster IPO.

Despite landing a royal flush with its $270 million bet on Facebook, Elevation Partners’ $104 billion portfolio company has stumbled somewhat since going public late last week. 

At market close Wednesday, Facebook was trading at $32 per share, well below the $38 price it debuted at last week. The company, which is partially backed by private equity and venture capital firms like Elevation Partners and Accel Partners, has been humbled since raising $16 billion in one of the largest IPOs in recent memory. 

Elevation purchased its stake across three investments totaling $270 million in 2009 and 2010. According to Facebook’s S-1 filings, Elevation’s remaining stake in the company was worth at least $1.38 billion when the company priced last Thursday. That stake is probably worth between $952 million and $979 million based on Facebook’s market cap as of Wednesday, said one market source.  

Accel Partners, which invested $12.7 million in the company in 2005, held an 11.3 percent stake prior to the float. Facebook’s S-1 filing indicates that the firm may generate around $2 billion in a partial exit through the float if underwriters exercise their option to issue additional shares. Their remaining stake is subject to the fluctuations of the company’s share price, and has likely fallen as well. 

The official value of Accel and Elevation’s remaining shares have not been publicly disclosed. Neither firm was available for comment at press time. 

Despite their remaining stakes taking a hit because of share price, the firms will still likely generate huge multiples from their investments, which were made during the company’s early days. Early investor shares not offered in the float remain locked up for periods ranging from 91 days to 366 days following the IPO. 

Other early investors include Goldman Sachs, Venture firms Greylock Partners and Meritech Capital Partners and Andreessen Horowitz co-founder Marc Andreessen. 

At $38 per share, Facebook’s $104 billion valuation was the largest of any US company at the time of its IPO. Since increasing its price range from between $28 and $35 to between $34 and $38, share pricing has trended downward. 

However, between a last minute increase of its prospective price range, a few NASDAQ technical blunders, reticence on the part of its underwriters and topsy-turvy post-IPO pricing, Mark Zuckerberg’s $104 billion creation has had its ups and downs over the last four business days. 

Many sceptics noted that, despite Facebook’s 900 million users, advertising revenue generated by the website may not be enough to justify its sky high valuation. Last week, General Motors withdrew its paid advertisements from the site because of ineffectiveness, according to reports. The automaker retained its own Facebook page, which is free. The announcement, made just days before the IPO, was not Facebook’s only concern.

When shares debuted on Friday, technical difficulties made it difficult for traders to see the results of their trades for nearly two and a half hours, according to a Reuters report. The stock finished the day just 23 cents over its opening price.

Furthermore, as the stock continued to flounder, reports indicating that analysts at underwriter Morgan Stanley had cut revenue estimates for the company also began to circulate. The New York Times has reported that some Morgan Stanley analysts advised clients to lower their expectations on the offering, which has already prompted a lawsuit from investors claiming that the underwriters failed to properly disclose their updated forecasts.