Facebook shares hit new low
Early backers get first chance to sell
8/17/2012SAN FRANCISCO -- Facebook's stock plunged to a new low Thursday as some of the social networking leader's early backers got their first chance to sell their shares since the company's initial public offering went awry.
Analysts interpreted the unusually high trading volume as a clear sign that at least a few of the insiders were seizing on a fresh selling opportunity. That is stirring a debate over whether they're simply locking in long-awaited gains on investments made many years ago or bailing out of a company that has lost its luster.
A breakdown on just how many major Facebook Inc. shareholders sold their stock probably won't be available until next week at the earliest. Securities regulations give them at least three days before they have to disclose such transactions.
The information is important "because if you are an investor who has been sitting on the sidelines waiting for a good time to buy the stock, you might decide to stay on the sidelines for a little longer after seeing which insiders decided to sell their stock," CapStone Investments analyst Rory Maher said.
All told, investors who owned a combined 271 million Facebook shares could have sold their holdings Thursday with the expiration of a ban known as a lock-up period. The restrictions were imposed on a group of venture capitalists, companies, and Silicon Valley cognoscente who invested in Facebook during its formative years and sold some of their holdings three months ago when the company went public at $38.
The highly anticipated IPO had valued the company at $104 billion, similar to those of Amazon.com Inc. and Pepsico Inc.
The shares have plunged by nearly 50 percent since then amid concerns about whether Facebook is destined to become a passing fancy and worries about whether it will be able to sell more advertising on mobile devices as users gravitate there.
Facebook shares closed Thursday at $19.87 a share, down $1.33, or more than 6 percent.
More than 156 million shares were traded, more than five times the stock's average volume over the past month. Trading in the overall market was lighter than usual.
The selling shackles will come off of an additional 1.66 billion locked-up Facebook shares during the next nine months to place more potential pressure on the stock. One of the biggest tests will come in November when about 1.2 billion insider shares will be eligible for sale.