Facebook’s First Lock-Up Period Ends (FB)

PUBLISHED: Aug 15 2012 @ 10:08 | Comments (0) | More info about Ed Liston

It has been very bumpy ride for the social networking website Facebook Inc. (NASDAQ:FB) ever since it started to trade publicly from May 18. Slowing growth of new users, falling advertising revenues and concerns over lower revenue generation per user has battered Facebook stock, which is now down almost 50% from their IPO price of $38 per share.

Nevertheless, from Thursday onwards, it will face even bigger test as the first lock-up period expires. With the end of the first lock-up period, some 270 million shares of FB stock will be available for sale from Thursday.

It is estimated that a total of 1.8 billion shares of FB stock may hit the market in next few months as the remaining lock-up periods expire.

A lockup period, which can last from 90 to 180 days, prevents insiders to sell shares in the market, so that scarcity of shares can boost the share price. However, with FB stock already getting hammered, there is growing concern that additional supply will further dent its value.

Looking at some recent examples involving internet companies where lockup period just ended, it seems FB stock could head further southwards. LinkedIn (NYSE:LNKD) lost 7% on the first day after the lockup expiration, while daily deals site Groupon (NASDAQ:GRPN) slumped 10%.

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