Facebook shares slumped to a new record low last night, after admitting it could not forecast when it will start to make the big profits investors have been hoping for.
The social network's first set of financial results as a public company turned out to be lacklustre at best, and a bullish performance from founder Mark Zuckerberg on his maiden conference call with Wall Street analysts did nothing to stem the slide in Facebook shares.
In fact, a sell-off that began well before the results came out accelerated in after-hours trading, and by the end of the day Facebook had lost 18 per cent of its stock-market value. What was already one of the most disappointing flotations ever seen in the technology industry has now turned into a complete rout, and the shares dipped last night below $24 for the first time, compared with the $38 which new investors paid barely two months ago.
At last night's share price, the value of Facebook has slumped from $104bn to less than $66bn.
The flotation was marred by allegations that the company kept secret important information about its finances, particularly the fact that advertising income was failing to keep pace with the social network's growing user base.
Last night, top executives drove home their message that it was too early to make forecasts for how quickly advertising income will grow. Because users in developed markets such as the UK and the US are increasingly accessing Facebook on their phones instead of on their computers, there is even less room for the company to slap up adverts alongside users' news feeds and photos.
The company is experimenting instead with letting companies pay to put ads directly into people's news feeds, mingled among the latest updates from their friends. It is making $1m a day from such "sponsored stories", half of that money coming from smartphone use, it was disclosed last night.
Nonetheless, the total figures for income and profits from the past three months were no better than analysts' forecasts, when investors had been keeping their fingers crossed for more. Facebook's revenue for the three months to 30 June was $1.18bn, and its profits – excluding employee compensation costs related to the flotation – were $295m. That was up only slightly from $285m a year ago, because Mr Zuckerberg has been hiring large numbers of new staff.