Facebook stock dropped by more than 4% in trading Wednesday to as low as $20.73 a share after employees and shareholders were freed up to trade more than 230 million shares of additional Facebook stock.
The first of three big lockup periods expired on Monday, giving Facebook employees the opportunity to sell off their stock for the first time since the company went public back in May. However, the stock market was closed on Monday and Tuesday due to Hurricane Sandy, so these employees had to wait until Wednesday to begin trading.
Facebook employees have spent the past few months watching as their company’s stock has been clobbered in the market, at one point declining to less than half its IPO value. The stock bounced back above $20 a share in early September, but as of the beginning of this month, the average Facebook employee had still seen the value of their Facebook stock decline by $2 million.
The question going into Wednesday was whether employees would cash out at the first chance or choose to hold onto their stock in a sign of confidence about its future potential. The declining stock price indicates that many have chosen to do the former. Indeed, as USA Today points out, trading volume for the stock spiked Wednesday morning, with 62 million shares being traded at one point just before noon, suggesting that employees were selling off stock.
This could be seen as a red flag for other investors, who may see it as an indication that even Facebook employees don’t have confidence in the company’s stock performance going forward. A similar situation took place back in August, after the first lockup period expired for Facebook insiders, freeing up early investors to sell off stock. Peter Thiel, one of the first investors in Facebook, ended up selling off the majority of his stock (about 22 million shares), which ultimately sent the stock price into a downward spiral.
To make matters more complicated, more than 900 million additional shares of Facebook stock are scheduled to hit the public market in the next month and a half as two more lockup periods come to an end. Chances are, there will be some turbulence ahead for Facebook stock.
As of publication, Facebook was hovering around $21 a share.
Image courtesy of Flickr, Chairman of the Joint Chiefs of Staff
Read more: http://mashable.com/2012/10/31/facebook-stock-lockup-expires/
Facebook Stock Drops 4% As Employees Start to Sell Shares
business, Facebook, Facebook IPO, Trending Small Bottom
No comments:
Post a Comment