Connect to share and comment

800m Facebook shares about to flood the market

The number of Facebook shares on the market could double when its third lockup ends Wednesday.

Clone of Facebook fails to wow investors 2012 26 07Enlarge
Facebook's third share lockout ends Wednesday and an extra 800 million shares could flood the market. (EMMANUEL DUNAND/AFP/GettyImages/AFP/Getty Images)

Facebook's already troubled stock price is about to take another hit Wednesday when millions of shares held by company insiders are released back onto the market. 

The publicly traded company's third share lockup is coming to an end and up to 800 million shares will be available for trading on the NASDAQ, reports CNN Money. The company already has 921 million shares trading on the exchange. 

Facebook went public on May 18 and included a "lockup" agreement that requires investors to refrain from selling their shares for a set period of time. 

Of course, not all of the Facebook's early employees and investors will sell their shares as soon as they can but a large number did decide to sell when the previous two lockouts ended. 

“It’s impossible to know whether VCs [venture capitalists] and other early investors will sell, but Peter Thiel’s sale of more than 80 percent of his stock is a sign that others may consider doing the same,” Wedbush analyst Michael Pachter told MarketWatch.

Thiel is a co-founder of PayPal and was one of Facebook’s first investors. He sold off most of his shares in August, reports MarketWatch. 

In all, 270 million shares were sold during that second lockout and Facebook's stock price plummeted by 6 percent. 

The company has been struggling to keep its share price up since they debuted at $38. As of midday Tuesday, the share price was down to $19.94. 

Facebook founder Mark Zuckerberg is eligible to sell 504 million of his shares, worth $10 billion but he has promised to hold on to them until September 2013, reports the Guardian. Zuckerberg's shares are not being counted in the total being released.

Despite concerns over its stock price, Facebook reported solid earnings last month that beat expectations. 

Sales rose 32 percent to $1.26 billion in the period that ended in September, reports Businessweek. 

“Buckling of the stock would occur because of lots of selling at the same time,” Brian Wieser, an analyst at Pivotal Research Group, told Businessweek.

“It seems like there’s enough demand to absorb this. Investors would have been a lot more nervous if third quarter numbers hadn’t come out well.”

Two more smaller lockups are also scheduled for the next year. On December 14 about 156 million shares will be released and the one year anniversary of the IPO, May 18, will mark the end of the lockup period with another 47 million shares hitting the market.

http://www.globalpost.com/dispatch/news/regions/americas/united-states/121113/800m-facebook-shares-about-flood-the-market