The perception that they're overvalued, or poorly managed, or what have you, hurts their ability to sell big advertisers on big-ticket advertising deals. These have been their bread and butter all along.
Over the last few years, many Fortune 500 companies signed $20MM+ yearly deals to advertise on Facebook, develop fan pages, etc. Some -- most infamously, GM -- are starting to pull back (or pull out altogether).
In very basic terms, Facebook makes the majority of its money from advertising. It makes the majority of its advertising money from a relatively small handful of very big advertisers. Shaken confidence in Facebook, for whatever reason, shakes the confidence of these advertisers, which jeopardizes Facebook's ability to make money.
All of this is leaving aside the financial damages associated with declining market cap. In a weird way, that's actually less relevant than the effect the busted IPO is having on Facebook's position in the ad sales business.
Over the last few years, many Fortune 500 companies signed $20MM+ yearly deals to advertise on Facebook, develop fan pages, etc. Some -- most infamously, GM -- are starting to pull back (or pull out altogether).
In very basic terms, Facebook makes the majority of its money from advertising. It makes the majority of its advertising money from a relatively small handful of very big advertisers. Shaken confidence in Facebook, for whatever reason, shakes the confidence of these advertisers, which jeopardizes Facebook's ability to make money.
All of this is leaving aside the financial damages associated with declining market cap. In a weird way, that's actually less relevant than the effect the busted IPO is having on Facebook's position in the ad sales business.