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.
Source: The Guardian