What are the worst case scenarios affecting share price after the Facebook IPO?

For the IPO itself, I don't really see a "catastrophic" worst case scenario. Let's look at their S1: http://sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm Since has already pulled stuff, I'll just copy from their table: NASDAQ ticker name: FB Lead IPO underwriters: Morgan Stanley, JP Morgan, Goldman Sachs Date founded: 2004 Number of employees: 3,200 Number of monthly active users as of December 31, 2011: 845 million Number of daily active users as of December 31, 2011: 483 million Net profit in 2011: $1 billion Revenue in 2011: $3.711 billion Revenue in 2009: $777 million $3.9 billion: Facebook's cash pile in 2011 $305 million: Facebook's cash pile in 2008 http://www.huffingtonpost.com/2012/02/01/fb-facebook-s1-filing-ipo_n_1248166.html Since they're sitting on $3.9 billion in cash, the company looks like it's going to be fine. They're doing the IPO so that their investors and employees can cash out of their equity. They'll use some proceeds to drive further growth, but they're pretty well resourced at the moment. I suppose the worst case is that crafty speculators drive up the price and then short while less astute day traders buy the hype and tank the trading price. Given that will still be the controlling shareholder and that isn't likely to change anytime soon, the impact of that behavior on near-term business operations ought to be minimal.

1. Facebook earnings are not as great as expected. Zuck doesn't care, wears hoodie to roadshow. 2. Unfortunately this news was not relayed until AFTER the prospectuses have gone out. 3. And it was only relayed to the lead bankers. 4. Who, instead of telling all the clients, decided to tell only the institutionals. 5. Meanwhile the lead bankers actually INCREASED the IPO price. 6. IPO allocation results in retail clients taking on way more stock than expected, with the institutionals taking way less (shocker) so there is less real money support. 7. On top of this, NASDAQ computer glitches at the open causes delays, HFT run amok. 8. FB trades down 30% in 2 weeks. Yup pretty bad.

Some combination of catastrophic data loss, a huge move forward by the DoJ regarding privacy concerns at Facebook, and maybe the uncovering of some gargantuan fraud involving their finances could really decimate their value. Slightly more realistically, privacy concerns could continue to escalate slowly and users could just use Facebook less, opting for a more distributed social networking paradigm (a little of Twitter, a little of Path, etc...) until Facebook actually starts losing users. But in reality I think Facebook's fatal flaw is that they went public so late. They're nearing in on 1 billion users. There are about 2 billion people on the internet. It's technically true that this means they've only reached about half of the current market, but honestly they've reached a huge huge percentage of the viable market already. There's not so much room to grow in users. They need to figure out new ways to monetize their userbase. That's going to be tough. If they don't figure that out, they'll be hitting a glass ceiling very soon.

Investors suddenly realize the valuation is insane and dump the stock like crazy. Keep in mind on average you'd better not participate in an IPO, unless you're a preferential client and have priority access.

In the long run if Facebook can't find ways to extract money from users or selling eyeballs then they will be slowly wind down. But looking at the fact that currently they can extract $1.2 of profit per user then I think that number will grow 10 fold in the next few years. So, excluding political or legal problems they should be fine.

The question has changed a bit since I originally answered. The worst case scenario is that the stock price goes to zero and you bought shares on margin using your mother-in-law's nest egg. That's it. Likelihood?  No clue.

Yes, of course it could drop 100%. Any business can potentially become worthless. But you should probability weight that outcome. It seems highly unlikely that FB will become totally worthless, so the "worthless" outcome is not something you need to worry much about. A more likely and very damaging outcome is a competitor comes up with a product that marginalizes FB and erodes its long-term value. In the late 1990s, people probably though Yahoo's position as a web portal was untouchable. In less than 5 years it was pretty much a complete joke. Technology changes rapidly. No company is immune to the forces of change.

I don't think in the short term there is a huge drop happening. There are two things possible in the long term i.e. it can go the Yahoo way or make a story better than Google. Issues that can impact revenue for FB in the long term.. Though FB might stay a habit with most users but the time users spend on FB might drop impacting revenue badly. Due to privacy issues in timeline many users might move to Google Plus. Now a days I prefer to upload most of my pictures in Picasa and share with family and select friends only which is very easy with Picasa and Google+. In some of the campaigns that we did on FB I have realized that after a time a particular brand stagnates on FB. Also, to engage with FB users one has to continuously come up with new strategies. Over a period of time Ad spend by big companies on FB might drop because it is too complicated.

That they trade at the same forward PE as Apple and Google, about $7 a share. That's a market cap of $15bn, which is less than their cash, so $10 is a plausible minimum for a while.