If your stock is going down you are less able to raise capital by doing a private placement (basically a pre-planned sale to fixed investors kind of like Zynga did and is currently being sued for) Anytime a company sells a large amount of stock, and then the stock continues to go down, a number of law firms will file lawsuits.
Perhaps most importantly your 'buying power' is reduced. If you notice there are a lot of 'acquihires' going around. Those can be done 'all stock' when the stock is strong but require 'cash and stock' or worse 'all cash' when the stock is weak. So if Facebook wants to continue to gobble up things like Instagram is can't go into a deal with "Hey, its a billion dollars, uh today, perhaps on Friday it will be 800 million." [1]
[1] Yes, I know its more complicated than that but I simplify for brevity.
Edit: So based off the downvote, either someone didn't like my lack of explanation, or it Zuck is lurking on HN. I'm guessing the former, so I'll explain. FB's value is so heavily tied to future growth expectations. Current P/E is 116, and compare that to a peaked out company whose P/E is more typically between 10-20 (see: YHOO, GOOG, APPL, ADBE, ORCL). If FB gets to $15, it's a P/E of 82, $10 = P/E of 55, $5 and you have 27. At $5 and its current earnings, FB is basically toast as an "innovative" company. So, I say a "sub-$15" value above because once it gets to that point this quickly after the IPO, dropping into single digits has to be a possiblity they consider. They won't have billions of dollars at their disposal to do whatever they please and will have to be more judicious in their spending.
P.S. I'm a programmer, not a finance-guy, so please correct me if I'm wrong about something.
They have to cut expense if they are making net loss or are in cash flow negative. Which is quite different from share price.
And as of your second part. Why would not FB have billions of dollars at their disposal if their share price tanks? They sold the IPO and already have got that cash in their bank account. They won't gain a single dollar if the share price rises neither won't they lose a single dollar if it tanks.
But is there an indirect relation besides the obvious? That's what the original poster asked. Your answer didn't reply it.
1. A lower stock valuation affects their ability to raise money and greatly reduces the amount raised,
2. Affects morale because employee stock holdings and options are worth less,
3. Causes investors to put social or board pressure on Facebook to make changes, effectively reducing management's control,
4. Possibly attracts SEC or DoJ attention which could mean time-expensive hearings and possibly fines for misstatements (a.k.a. lies.)
5. Has a psychological effect on users who want to be part of something popular and winning and on app developers uncertain if they want to trust a company on the downs with their livelihoods.
Edit: this doesn't concern Facebook directly, but its investors and its newly created millionaires/billionaires will want the price to stay up so it doesn't affect IPO prospects of their other companies. This is more the case for VC with a steady deal pipeline than the newly rich employees who won't have anything ready for IPO for several years, possibly with an entire cycle between now and then.
There's many more reasons, but that's a big one. No one is going to come work for a company for equity that doesn't care about their stock price.
What??
Facebook employees apparently work pretty hard. They get huge rewards, when their stock goes up, so they want to company to succeed.
Once the stock stops shooting up, they stop caring about the company. They won't make money from their stock options, they'll make money from getting promotions or a good bonus. Impressing their manager is going to be more important than the company's overall success.
Employees will lose interest, and managers will have to introduce more rules, to "incentivise" the workers (and other managers).
Gets down to the classic: it's not what you do but how you are seen to be doing it.
Yeah, superhard way of making millions. Making a web site in your 20s and convincing the pension funds to give their savings from 30 years of real "hard work" while trying them not to notice the scam before you sell all your stock.
Bringing psychology back in, yes I can see how it would really tear people up to feel like they are "missing out," and the understanding that they are getting the "true value" is probably not much of a substitute. If the money in my bank account fluctuated daily, for reasons beyond my control, it would drive me right up the wall.
Facebook was somehow hyped as being above the middling concerns that every other public company must address. But they are not, and have lost value accordingly.
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.
It also hurts the morale of all the employees that started working in the past ~12 months, whose equity was valued at an amount higher than $20.
I think everybody sees the value in facebook in the tech world, for all the data they have, but the general public does not.
That will make it look like a cycle of cashing the over hype.
http://www.pehub.com/146588/the-%E2%80%9Cfacebook-problem%E2...
The second argument I've heard is that it allowed Zuckerberg and some of his closer companions to cash out a large chunk of cash for the first time.
Facebook itself did not need money to my knowledge