Facebook closed at $33.03 today, a staggering 13% off last week's initial public offering price of $38.00. The outrage from this disastrous plunge is rising and the lawyers are circling. It's unthinkable that a stock's price would drop after its IPO. Didn't the executives at Facebook - and especially those greedy, notorious Wall Street underwriters - know that stocks are only supposed to rise?
The 13% drop reminded me of another investment: non-traded real estate investment trusts. An initial investment in a non-traded REIT is worth about 12% to 17% less than its offer price immediately after it's sold, after all its initial offering and acquisition costs are deducted. Non-traded REITs are just like Facebook.
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