A sign at the Facebook campus in Menlo Park, Calif. in May 2012. (Photo: Jeff Chiu AP)
fell 66 cents, or 3%, to $21.28 early Wednesday, first day that many
current and former employees were able to sell their shares.
"lockup" expired for 179 million employee Facebook shares Oct. 29. But
since stock exchanges were closed Monday and Tuesday due to Hurricane
Sandy, Wednesday was the day of the big score for those who decided to
Trading volume was heavy, with more than 37 million shares
changing hands in the first 30 minutes of trading, more than half
Facebook's average daily volume of 52 million shares. Shortly before
noon, volume exceeded 62 million shares.
"You've got people
anticipating a significant increase in selling pressure from the shares
being unlocked," says Mark Harding, analyst at JMP Securities.
price didn't fall below $20 a share because of buying by investors
encouraged by the company's better-than-expected earnings reported last
week, Harding said. Also, the company withheld some shares to pay
employee taxes due on the shares, which also reduced selling pressure,
he says. "We won't see employees needing to sell in order to cover
taxes," he said.
Facebook reported a 32% quarterly revenue gain,
to $1.3 billion. Investors were especially encouraged by the fact
Facebook got 14% from mobile advertising. Meanwhile, the company earned
12 cents a share excluding one-time charges, topping forecasts by a
penny a share.
Wednesday's unlocking is just an opening act. Even more shares, 749 million, will be unlocked Nov. 14.
minority shareholders aren't required to disclose their stock sales,
it's impossible to determine with certainly how much selling came from
employees. But the number of new shares eligible for sale equals roughly
8% of Facebook's 2.2 billion shares outstanding. That's a large chunk
of stock that would need to be absorbed by buying demand.
have anticipated this end of the lockup period ever since the No. 1
social networking company went public in May 2012 at $38 a share. The
stock price has fallen more than 40% as investors resisted the deal due
to its relatively high IPO price compared with other Internet companies
and questions about the company's ability to boost revenue from mobile
Previous lockup expirations have been poisonous for the
stock. Facebook shares dropped to an all-time low in the days following
the first lockup expiration in August when investors and some directors
could sell. On Aug. 16, Facebook shares set what was a new low at the
time: $19.87 a share in heavy trading. Investors turned even more
negative on the stock on news that early Facebook investor Peter Thiel
was among investors selling large amounts of the stock.