SAN FRANCISCO -- Facebook shares fell nearly 4 percent on Wednesday to $20.88 -- nearly half of what they were worth when the company went public on May 17.
It has been a tough week for Facebook. Last Thursday, the company's shares declined 8.5 percent in regular trading, as investors reacted to the weak earnings report the day before of Zynga, the social gaming site that is a major Facebook partner. Then last Friday, the stock was down again, to slightly under $23 a share in after-hours trading, after Facebook's own earnings report.
This week the stock declined steadily each day.
"In this market environment, investors have little appetite for speculative opportunities, and unfortunately for Facebook, the stock will remain in the penalty box until they can demonstrate improving growth trends," said Colin Sebastian, an analyst with Robert W. Baird & Company.
"That said," he added, "Facebook is a powerful platform with enormous potential to change display advertising."
Facebook made its Wall Street debut in May at a spectacular $104 billion, or $38 a share. Its assets seemed obvious: nearly a billion users, rich data about their tastes and friends, and potentially a variety of ways to make money from them, principally through advertising.
But the stock fell from its offering price almost immediately and except for part of June, never gained much ground. At $20.88, it has nearly lost half its value.
Another reason for the stock slide could be that Facebook employees will be allowed to start selling shares this month, although the bulk of the shares will be unlocked in November, raising fear on Wall Street of a glut of shares on the market.
Facebook declined to comment.
Still, the company is making money, acquiring other companies and expanding its work force. Its second-quarter revenue was $1.18 billion, which exceeded the expectations of analysts. And Facebook gained users, reporting 955 million, up from 901 million in the previous quarter.
But advertising revenues have not grown as fast as Wall Street would have liked. In the second quarter, these revenues grew 32 percent. That was a slowdown from the previous quarter, when advertising grew by about 45 percent, and far slower than in 2011.
Part of the problem, analysts say, is that users are migrating to the mobile platform faster than anyone anticipated -- more than half are using Facebook on their smartphones and tablets -- and the company has only recently started offering advertisements on the mobile platform.
The market research firm eMarketer said Wednesday that companies were expected to spend $6 billion on mobile advertising this year, with the United States and China making up the two largest markets.
Mobile advertising poses a fundamental challenge for Facebook, because it must be careful not to crowd the small screen with too many endorsements that could alienate users. On the other hand, the mobile platform offers Facebook a new way to collect rich data, from the location of the users to the applications downloaded.
Facebook has been experimenting with all sorts of ways to increase its advertising.
Morningstar, in a report issued last Friday after the company reported its second-quarter results, commended Facebook for its potential to refine its ad targeting but flagged several risks, including stepped-up regulation on whether the company would be allowed to track its users across the Web in a bid to serve up relevant advertising.
Morningstar warned investors that shares would continue to slide for the "next several quarters." It said, "We would expect further near-term disappointment and would encourage investors to consider an even wider margin of safety before making an investment."
This article originally appeared in The New York Times.