SAN FRANCISCO -- The reality of Facebook's $2-billion-plus acquisition of Oculus VR set in on Wall Street on Wednesday, dragging down Facebook shares and the Nasdaq.
Facebook fell nearly 7% to $60.38 one day after it announced its second blockbuster acquisition this year. Last month the giant social network made jaws drop when it said it would pay $19 billion for mobile messaging service WhatsApp.
The tech-heavy Nasdaq fell 1.4% Wednesday to 4,173.58, its lowest close in more than a month.
In buying Oculus, the Irvine, Calif., maker of virtual reality headsets, Facebook is betting that the next big wave in computing will be virtual reality. And Chief Executive Mark Zuckerberg is showing his willingness to open wide Facebook's wallet to snap up promising young companies before competitors can.
So far he has a good track record. His first big bet, $1 billion for photo-sharing service Instagram in 2012, is looking pretty smart these days. The service just hit 200 million users.
But investors are clearly spooked by the latest pricey acquisition.
Macquarie Securities analyst Ben Schachter said there was "no near-term financial model that will drive the $2 billion valuation."
"The price was $2 billion because that is how much Oculus VR needed to sell, and it was likely some number above what other entities were willing to pay," Schachter said. "Like WhatsApp, this is a small team of passionate engineers and others that is laser-focused on one area, in this case virtual reality. We look forward to seeing how this technology develops. If it can live up to the virtual reality promise that many have been waiting decades for, then the $2 billion price tag may become the deal of the century. If the technology doesn't evolve, then Facebook's $2 billion bet will be lost."
TheStreet's Jim Cramer said investors should trust Zuckerberg. Comparing Oculus to Google's $1.6-billion acquisition of YouTube in 2006, Cramer said investors should be patient in seeing if the Oculus deal pans out.