271m Facebook shares were released after a ban which prohibited pre-IPO investors from trading expired, causing the price of the shares to drop below $20. Over the next ten months almost 2bn shares are to become eligible for trading. The largest group of these in November when those held by employees of Facebook will be freed.
Pivotal Research Group analyst, Brian Wieser, says that how they manage things in November is a big deal. The stock price fell by 7% to $19.69, an all-time low, and then rebound to close at $19.87. This was the worst performer on both Nasdaq 100 and S&P 500 since May 17 when it was listed, according to S&P Capital IQ.
Thursday’s trading volume tripled the level on Wednesday to 156.7m shares – which indicates that new shares were sold rather than existing ones traded. Because of the low cost to short interest it is at its highest level. According to SunGard’s Astec Analytics over 92m shares are open for shorting.
Facebook shares have been under unrelenting pressure since they were first listed at $38 and peaked at $45. Their first earnings report did little to guarantee growth prospects to its investors. Many will want to keep the stock after the selling ban is lifted, however clients of firms like large pension funds might find appeal in selling now.
President of National Venture Capital Association, Mark Heesen, said that most people are still very happy to hang on to their shares. He expects people who bought their shares early to get a handsome return even considering the current stock price. Post IPO investors are not expected to see a profit.