Someone is artificially manipulating the Facebook Stock

Today is Monday, May 12, 2012. I have predicted that the Facebook IPO stock price wouldn't go through the roof. To put it bluntly, Facebook is not as smart as Google, and for all of their users, they are having trouble making money. They make just $4 per user per year. Google makes an order of magnitude more than that.

JP Morgan, and Morgan Stanley and the underwriters of Facebook really showed their greed when they set an opening price of $38 per share, to value the company at 100 times earnings. And this greed will backfire on them. Saner rational minds will take over.

My valuation of Facebook (which you can read HERE) puts their true stock value in the $7 per share range, and if you want to account for the hype you may go as high as $14 but I wouldn't put that high a valuation on it.

But here is the curious thing. I spend a lot of time in front of my computer, so I decided to watch (and capture) the stock price variation of Facebook for the past two days. There were two curious incidents both near the close of the day.

On the opening day last Friday, the price jumped to $42 dollars per share on the first trade, and then slowly came back to sanity. Towards the end of the trading day, when it looked like it would dip below $38 per share, it always jumped up, but just by a penny. In spite of all odds, it never crossed the $38 per share mark. Many times it fluctuated between $38.00 and $38.05. It was almost as if it was being artificially held above $38.

Then today for a couple of hours before the close, the same thing happened. Of course, Facebook stock fell today, but for the past two hours before the closing bell, it fluctuated at $34 for a penny or two. This is highly unusual behavior for a stock priced at over $30.

Then it became obvious. The underwriters or someone is artificially maintaining the stock price at psychological barriers. On opening day, falling below $38 per share would be a major psychological blow, and it perhaps would cause the price to be driven down very low. Today, at $34 the same thing happened again. The stock had support at $34. It was just barely enough support.

Whoever is supporting it, is someone who profited from the high valuation. Losing some of their obscene profits by supporting the artificially high stock price looks good on them.

My prediction -- tomorrow will not be a super stellar day for the price of Facebook stock. Time will tell.

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