Although Facebook Inc(NASDAQ:FB) has lost almost half its value in stock prices after their initial public offering in May, it still has some supporters, mainly mutual fund managers, who feel that Facebook still has the potential for a complete turnaround. Lots of funds own stocks belonging to the social networking giant and for some of them, the Facebook stock is among their largest holdings.
Six funds of Morgan Stanley Investment Management own a large amount of Facebook stock; in fact, it counts in their top 5 holdings as per the latest reports in July. The stock constituted 5.7% of the largest fund in the group known as the $1.6 billion Morgan Stanley Focus Growth fund.
On opening day, shares were valued at $38, but it rapidly declined in the next trading sessions. The reasons for this sharp fall are first-day trading glitches, issues about Facebook's revenue potential, and lawsuits filed by disgruntled shareholders. However, Zuckerburg is positive about the upcoming revenue potential from mobile users rather than those who use desktops to access Facebook.
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The biggest obstacle in the mobile domain is the limited screen size that hinders display of lucrative revenue-generating advertising. Revenues from mobile applications have not been too good. Christopher Baggini, manager of the Turner Titan Fund has stated that Facebook has risen to the issue at hand and are looking for innovative ways to combat it. Facebook might be developing a new product exclusively for mobile users and inserting more ads in status updates and photos that are highlighted by mobile news feeds.
Apple’s iPhone 5 has also given a glimmer of hope since the screen size is bigger than previous models and the Facebook mobile app has been integrated smoothly into the iOS. The larger screen will tackle the problem of mobile advertising to a certain extent.
As far as losses are concerned, the investment in Facebook is not a “bad” one as such. Some funds have taken possession of Facebook shares before the IPO at extremely low prices. Moreover, fund managers are judged on the fund’s overall performance. If they have selected a losing stock, it does not affect them that much.
Shares of FB soared about 16% this week.