SAN FRANCISCO — The Facebook spring is over. The dog days of August have taken hold.
In May, when investors tripped over themselves to have a piece of Facebook, not even the skeptics predicted what has happened since. Three months after the offering, shares have lost more than 40 percent of their value, closing at just under $21.81 Friday, from $38 on May 18.
The stock began to dip immediately after its debut on the public markets, and at first, technical glitches with the offering were blamed. But these problems do not account for the stock's subsequent free fall, analysts and shareholders say. That decline, they say, can be traced to several factors, among them the sheer size and price of the initial offering, early exits by major investors and slowing growth. Not least, the stock seems to have been jinxed by Facebook's own fairy tale.
''The underwriters (and the media) did a great job of hyping Facebook leading up to the IPO, and the sell-side (including me) did a great job of hyping it after," Michael Pachter with Wedbush Securities, an equity research firm, wrote in an email.
The next test for the stock could come soon. Over 1.6 billion shares will be eligible to come on the market in several waves, starting Thursday, when a number of shareholders are allowed to sell. Investors may fear that an influx of shares could cause prices to fall even more.
One former Facebook employee, who did not want to be named because he did not want to damage his relationship with onetime co-workers, said he expected other employees to cash in their stock options as soon as they could, and predicted that the stock's woes could make it difficult to retain and hire talent.
The former employee pointed out that many of the company's early big backers — including Peter Thiel, an original angel investor, and Accel Partners, one of its first venture capital funders — sold a hefty portion of their shares at the peak price.
Kevin Landis, chief investment officer of Firsthand Funds, an asset management firm, now has to weigh what to do with his piece of Facebook. On average, his shares are now worth about two-thirds of what he paid. Under the purchase terms, he may not sell until late this year.
It's not "a good feeling" he said, but he added that he remained confident that with so many users and so much data on them, Facebook is destined to be the most lucrative advertising platform in the world.