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29 May 2012 One Comment

Investors Turn to Forex as Facebook Shares Plummet

Plummeting Facebook shares have left many investors feeling they were robbed by Wall Street after the much-anticipated float of Facebook IPO failed to live up to expectations as the ‘investment of the century’. At the end of the first week’s trading, shares are around $32 after they dropped by 13% in the first hour of trading. A number of investors jumped on the bandwagon; foreseeing a great buying opportunity in hopes that the Facebook IPO would be the next Google. But as prices moved against them, investors and shareholders quickly began to panic and many expert traders are advising to stick to trading with a FX broker and on other markets that are within investor’s areas of expertise.

Shareholders saw a fifth of their investment lost in the group. Opening at $38, shares rose to $40 before falling to less than $30. Facebook founder and now chief executive, Mark Zuckerberg is rumoured to have saved himself from a £111m loss by selling his stock at the float price before it collapsed. However, according to a report the 28 year old co-founder of the popular social networking site Facebook lost $3.2 billion when the firm dropped 16.5%.

Further allegations have contributed to the belief that Zuckerberg may have been aware of a fall in company revenue ahead of the float which was subsequently concealed from investors. Despite facing a lawsuit over the matter, Facebook is denying all claims and US Senators are said to be investigating the matter.

The lower forecasts no doubt contributed to the mass sell-off that ensued as the shares hit market and the share price plummeted. But why did so many people decide to invest in an internet company? Facebook has traded successfully for years on opaque second markets for good prices despite little financial information being available about the company. Hype surrounding the valuation of Facebook on these markets fuelled the belief that demand for Facebook would continue to soar in its IPO.

Successful investors and market traders know that it takes more than a big brand deciding to float their stock to get them to invest. Experienced traders spend time researching market movements, stocks and Forex to ensure they make intelligent trading decisions and sensible investments that could lead to profit. A good Forex broker will offer the educational material and training aids for new traders who are looking to invest sensibly in the markets. The plummeting share price of Facebook has led many amateur traders to think again when it comes to investing their assets. Managing loss in the most important part of investing so it makes sense to trade only what you can afford to lose.

TD Ameritrade’s chief derivatives strategist, JJ Kinahan, blamed ‘emotional trading’ for the plummeting share price. Successful investors in the markets know that they must trade without emotion and make trading decisions based on what the market is telling them, not what they feel like they should do. Media hype may have additionally contributed to investor behaviour as amateur investors caught up in the excitement began trading the news, something which experienced traders would never recommend.

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