Facebook Declines Below $29 As Options Trading Starts

Facebook Inc. (FB) shares fell to a new low, extending losses from the worst-performing large initial public offering during the past decade to more than 24 percent.

The stock fell 9.6 percent to $28.84 in New York, below the prior low of $30.94 on May 22. Facebook debuted on May 18 after underwriters sold shares at $38. Facebook options trading began today, with volume for puts exceeding calls by 1.2-to-1, data compiled by Bloomberg show. More than 200,000 puts giving the right to sell traded.

About $25 billion in market value has been erased from Facebook as bearish sentiment built in stock and options markets after the social networking site went public while U.S. equities headed for the biggest monthly decline since September. The company, its underwriters and Nasdaq OMX Group Inc. (NDAQ) were sued last week by investors who say they lost money in the IPO. June $30 puts were the most-active contracts, with volume at 23,723. They were followed by June $34 calls and June $32 calls.

“People are disillusioned,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview with Bloomberg. He doesn’t own shares of Facebook. “A lot of investors believed the hype,” he said. “In this type of volatile market environment, people are not going to take chances.”

Facebook shares climbed as high as $45 on May 18, when the shares ended the day with a price-earnings ratio of 83.1, making the Menlo Park, California-based company more expensive than 99 percent of Standard & Poor’s 500 Index stocks.