Understanding stock markets

Monday, 6 August 2012 00:00 - - {{hitsCtrl.values.hits}}

I read with interest that Facebook stocks had reduced to US$ 21 per share by end of last month. That means it has had a dip of US$ 14 from its offer price of US$ 35 per share in May 2012.

At that time, Facebook Inc. had a market cap of US$ 104 billion, approximately five times the total market cap of all Sri Lankan companies. However, at US$ 21, the market cap has reduced to US$ 62 million, which means the company has lost US$ 42 billion in market cap or about twice the total market cap for all Sri Lankan companies!

Even so, I have not seen anyone in the US calling Facebook a bankrupt company or indulging in insider trading, market manipulation, etc. The difference is, in the US, they understand stock markets, but in Sri Lanka, we don’t.

P. Somasunderam

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