Featured Posts

Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

Read more

Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

Read more

Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

Read more

Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

Read more

UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

Read more

Facebook shares hit all-time low as lock-up expiration lets insiders sell

Category : Business

Analysts split on whether investors will take advantage of end of lock-up period as shares near half of the $38 IPO price

Facebook’s shares fell to new lows Thursday as insiders were freed to sell another 270m shares.

The expiration of a lock-up period for insiders increased the pool of available shares by 60% and had worried analysts that it might lead to more falls in Facebook’s already battered share price.

Their fears proved well founded in early trading as Facebook’s share price 7% to $19.83, their lowest level since the $38 IPO price set in May. They ended the day at $19.88, just over 47% below the IPO price.

The expiration of the lockup means early investors including Goldman Sachs, Elevation Partners, which counts U2′s Bono as a partner, and DST Global are now allowed to sell more shares. Goldman and DST were among the investors who increased the number of shares they sold at $38 shortly before the IPO.

Facebook’s shares have got off to a poor start after one of the most hyped sales in recent history. They fell below $38 within days and had dropped below $20 at the start of August. The price has been hit hard as analysts have worried that the firm has yet to figure out a way to make money from mobile users, the fastest growing part of their business, and fears that growth is slowing.

After such a precipitous fall in share price, analysts are split on whether investors will take advantage of the end of the lockup to sell more shares. One analyst, who wished to remain anonymous, pointed to Angie’s List, a referral service, whose share price plummeted on Tuesday after its IPO lockup expired. “I wouldn’t even think of buying this until the price comes down,” he said.

Facebook sold some 421m shares at its May 17 IPO, a further two billion shares will be released for potential sale between now and next May, when the final lockup expires.

Tom Forte, analyst at Telsey Advisory Group, said he expected more volatility in Facebook’s share price in the short term. Another 243m shares are set to be released from lockup between mid-October and mid-November. On November 14, co-founder and chief executive Mark Zuckerberg will be able to sell shares and more than 1.2bn shares will be available for trading.

“I’m a glass half-full man on Facebook. In the near term I expect increasing pressure on the share price as more shares come unlocked. Holders may be unwilling ti part with their shares at nearly half their IPO price but in the near term there are going to be more shares out there and not enough demand to pick them up,” he said.

But Forte is more confident on Facebook’s future once its gets through the lock-up period. He has a 12-month price target of 42 for the shares. “I think Facebook will figure out a way to monetize mobile advertising,” he said.
The company and its bankers are facing legal action from shareholders who have accused them of selectively handing out negative information about Facebook’s mobile issues to some shareholders ahead of the sale.

The fall comes as Facebook’s peers have experienced similar setbacks on the US stock markets. Shares in Groupon, the online daily deals site, hit a new low this week after announcing that revenue growth had slowed and profit margins were shrinking. Groupon’s IPO launched at $20 a share last December and its shares now trade for just over $5. Zynga, the social gaming company behind hits including Words With Friends and Draw Something, has lost 68% of it value since its IPO last year.

Post a comment