Facebook shares hit a new low as share lockout ends
UPDATE - Shares in Facebook hit a new low last night as they ended closing 6.2% down at $19.87 following the end of the share lockout.
The latest drop means that shares in the social network at now worth half of what they were when it floated on the Nasdaq at an IPO price of $38.
However, the fall could have been much worse indicating that many investors are hanging onto their shares in the hope that they bounce back.
Thursday 1600 - We have already had some bad news this week for the new generation of dotcom shares as Groupon suffered after its financial results disappointed Wall Street.
Today it’s Facebook’s turn again. It has seen its shares take a big hit in New York this morning, dropping more than 6% to 19.89 at one stage, as the 90-day lockout period that stopped investors and others selling their shares ended.
More than 270 million shares have today been unlocked. That figure represents more than half of the 421 million shares sold in Facebook’s IPO in May.
However, as the FT reports “almost 2bn shares will become eligible for trading over the next 10 months, but analysts expect the most volatility in November”. This is when stock held by Facebook employees among others will be freed:
“This is still nothing in comparison with November,” said Brian Wieser, an analyst at Pivotal Research Group. “How they manage through that is the big deal.”
“Facebook itself has had troubles in providing to the Street assurances that it can monetise itself and generate strong earnings,” said JJ Kinahan, chief derivatives strategist at TD Ameritrade. “Not a lot of people are convinced.”
The latest fall in Facebook’s share price follows a dip last month after it admitted that 83 million Facebook accounts were fake.
The fall in Facebook stock is more than double the decline indicated in premarket action, according to Reuters.
“Pressure will be back on the shares now that liquidity is back in the market,” said Frank Davis, director of sales and trading at LEK Securities in New York. “If (the value of) your holdings has been cut in half, are you going to sit around and risk the rest of that?”
“The name has pulled back to a point where you can find a level of support, and the volume should have the wherewithal to hold up,” Davis said. “There shouldn’t be excessive pressure on the stock today.”
Another 243 million shares will be released from lockup between mid-October and mid-November. On November 14, more than 1.2 billion shares will be available for trading. Chief Executive Mark Zuckerberg will not be able to sell his shares until then, Reuters reports.
Earlier this week Facebook said it would begin tests to expand the reach of brand ads in newsfeeds. That followed a report last month saying that Facebook’s ad revenue growth had slowed to 28%.
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