Facebook stock falls nearly 47% below IPO price


Facebook stock fell to a new low Thursday after the expiration of a ban that had stopped some investors and insiders from dumping millions of shares they own in the social media company.

After a lifting of a ban known as a lock-up period, investors including Accel Partners, Goldman Sachs, Zynga CEO Mark Pincus and Facebook board members James Breyer, Peter Thiel and Reid Hoffman were among those free to sell stock they own.

Facebook stock declined nearly %6 till the mid-session. If investors continue to dump holdings, the market would be flooded with nearly two-thirds more shares.

It is not yet known whether early investors had sold Facebook stock, because they have three business days to disclose any sales. But it is very likely Facebook stock holders to try to unload holdings further.

Venture capitalists who invested in Facebook as early as 2005 were most probably looking to sell at the earliest opportunity. Even trading at about half of its IPO price, Facebook stock is still quite expensive.

Thursday was only the first of several lock-up expiration dates for Facebook stock. The biggest one is coming in the third quarter of 2012. Only 271 million shares became eligible for trading Thursday. By the time all the lockups expire, that will amount to 1.91 billion. That is nearly four times the 421 million shares that had been trading since Facebook began trading publicly 90 days ago.

Facebook stock traded as low as $19.69 before bouncing back to $20.14 in afternoon trading Thursday. That is about 47 percent below its initial public offering price of $38. If the stock hits $19, it will have lost half its value since Facebook went public in May.

Investors have been concerned about Facebook’s ability to keep increasing revenue and make money from its growing mobile audience.

Lock-up periods prevent insiders from unloading shares too close to an IPO and can help prevent volatility that might occur if too many shareholders decide to sell a newly traded stock all at once. They generally start to expire 90 days after a stock makes its public debut. Thursday marked 90 days since Facebook’s began trading publicly on May 18.

However, few investors view the present situation as buying opportunity. Reed Hastings, the cofounder of Netflix and a Facebook board member, recently bought a cool $1 million worth of shares in the social network, according to a regulatory filing submitted Wednesday. He purchased roughly 47,800 shares at an average purchase price of $21.03 each.


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