In evaluation of this social company, banks use data and merits to value it. Due diligence and consideration was devoted in the selection of the most relevant method to be used. Therefore, the most suitable method used by a number of banks is the equity research method.
The miscalculation that was made falls on the side of forecasting the long-term agenda. Initially there was a high demand for the stock because numerous number of potential customers had believes that the market price of the share would increase hence being in a position to earn profits from the investment (Yegge, .2002). This was unfortunate as once the stock was evaluated, it became less lucrative. This was due to the fact that the firm experienced loss due to technical glitches. The valuation too affected Facebook employees negatively who had an eye on valuable shares. The most disappointing issue was the lowering of the interest in stock price by the investors. This was a greatest impediment to the achievement of company long-term goals.
The above errors could have been minimized by lowering the price stock. This could lower the cost of investment in stocks. Moderate valuation of the stock price could subsequently increase the demand for the stock as the law of demand states that the lower the price, the higher the demand. The company could accumulate cash reserves for future mergers and acquisitions. More awareness could have been made for the investors to be fully aware of the performance of the stock price in the stock market to cub the risk of incurring the losses once the investors have made solid decisions to invest.
Within the first year of performance, Facebook engrossed more investors when Netscape stock was offered at around $28 per share which was equivalent to $75 after a one day of offering. This thereafter, hiked to $171 leading to company market capitalization to be $2.2 billion.