Facebook Inc's shares slid 6.2% to another record low on Tuesday, diving for the third straight day since lackluster results showed decelerating user growth and revived doubts about its ability to sustain its rich valuation.
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A sobering report from Bernstein Research, combined with online chatter about the potential proliferation of automated Facebook accounts and a looming sell-off of employee shares next month all conspired to rock the stock, analysts say.
Facebook has lost more than 40% of its value since becoming on May 18 the first American company to debut with a value of more than $100 billion.
The stock, down 6.2% at $21.71, still trades at more than 40 times forward earnings, versus Google Inc's 15.
Investors have punished the stocks of the No. 1 social network and other consumer-focused Internet companies such as Zynga Inc, questioning their ability to sustain growth and maintain lofty valuations.
Last week, Facebook reported results but offered no outlook or forecast for the year, disappointing investors who had hoped for affirmation of its growth prospects.
Wall Street is also bracing for a potential deluge of hundreds of millions of shares after August 16, when Facebook employees can sell their company-awarded shares for the first time.
"It's a combination of the Bernstein note, and partly complaints about the Facebook bot. Lockups are also causing pressure on shares today," said analyst Herman Leung of Susquehanna Financial Group, which owns and is a market maker in Facebook shares.
"People are just wondering what the next update is, and there's more headwinds than not. But the long-term story still feels intact."
Facebook's IPO was to have been the culmination of breakneck growth for the company that Mark Zuckerberg started 8 years ago in his Harvard dorm room. Instead, the May 18 Nasdaq debut was marred by trading glitches and accusations of inadequate disclosure.
On Tuesday, UBS blamed a 349 million Swiss franc ($360 million) loss from Facebook's botched debut on exchange operator Nasdaq, becoming the latest financial investment institution to report a hit from the first day of trade.
UBS said orders for the stock had been entered multiple times due to a systems failure.
Compounding Facebook's woes was a Tuesday report from Bernstein Research analyst Carlos Kirjner that valued its display advertising business at just $19 a share, half the company's $38 IPO price.
Kirjner set Facebook's 12-month target price at $23, placing a $4 premium on what he said was untapped advertising potential around the company's innovative social graph. But, that potential remains "yet to be defined and built," he wrote.
Kirjner on Tuesday upgraded Facebook to market perform, but suggested that the lockup's expiry, which could unleash up to 211 million shares, will weigh on the stock.
The size of the current float could be nearly tripled by November, as more and more employees begin to sell, Kirjner warned.
Finally, an Internet startup late on Monday publicly called into question Facebook's user-number claims, igniting debate among industry executives and on the Internet.
A commerce site called Limited Run, in announcing that it was deleting its Facebook page, claimed that 80 percent of its ad-clicks on Facebook came from "bots" or automated accounts, and only a fifth from genuine users.
"We're currently investigating their claims," said an external spokeswoman for the social network.