"Investors aren't willing to give companies the benefit of the doubt," Sebastian says. "And with companies like Facebook, which are speculative, giving the benefit of the doubt is too much to stomach right now."
How to fix it
Now, the question is what, if anything, Facebook could do to repair its image with investors. A few suggestions from analysts and IPO observers include:
•Make Mark Zuckerberg chief technical officer. Investors would rather have a CEO that has more experience dealing with Wall Street's demands, says Francis Gaskins of IPOdesktop.com. Investors think Zuckerberg's behavior during the roadshow highlights his desire not to get overly consumed with the stock, he says. "He's not cut out to be the CEO of a hard-driving Silicon Valley company responsible to investors," he says.
But as Zuckerberg owns 57% of the Facebook vote, a change like that is unlikely, Gaskins says.
•Put making money on mobile access a top priority. The shift of Facebook's audience from the website to mobile devices is causing investors to worry about the company's long-term potential. Facebook needs to be clearer on how it will manage this critical transition, says Arvind Bhatia of Sterne Agee. It needs to "explain how the mobile transition, while challenging in the short term, will be lucrative," he says.
•Underpromise and overdeliver. Facebook needs to be more precise with investors, explaining what market it's going after, how big the revenue for the market could be and what its piece could be. "This story needs to be communicated well and the long term shown more clearly," Bhatia says.
But Facebook needs to be careful to guide investors to reasonable and obtainable objectives. "One thing investors like is underpromising and overdelivering," he says. "That pays off more often than not."