A deluge of Facebook shares hit the market on Thursday as a lock-up period preventing sales by some company insiders and early investors came to an end. As trading started on the Nasdaq the stock fell over five percent.
The world’s largest social media network went public in May in one of the most anticipated initial public offerings in years, with an initial sale of 421 million shares.
However, share prices spiralled downwards sharply and swiftly amid concerns about valuation and growth prospects. Facebook has shed almost 50 billion dollars in value since its debut – more than the total valuation of computer maker Hewlett-Packard or coffee shop chain Starbucks.
Since then the status of social media stocks – such as Zynga and Groupon – as Wall Street darlings may have slumped but Facebook’s big day will be on Nov 14, when more than 1.2 billion shares will suddenly be available for trading.
The number of shares offered for sale on Thursday may be muted because of the low price. Insiders could well hold on to them for now hoping for a recovery.
“If Facebook was trading at $30, we would see a much larger effect from the lockup expiry. But at $20? Not so much,” said Steve Place, a founder of options analytics firm investingwithoptions.com in Mobile, Alabama.