Facebook Shares Go Up Despite End Of Lock-up Period

on Nov 18, 2012

The expiration of the lock-up period on over 800 million Facebook (NASDAQ:FB) shares on Wednesday, November 14 had left many investors worried with the prospects of a massive selloff lowering the stock price even further. Previous cases of the company lifting restrictions on shares held by its staff suggested the potential for this outcome, but the negative prognoses have so far failed to materialise with Facebook’s share price actually climbing by 12.6 percent, closing at $22.36 (£14.11) on the NASDAQ, The Telegraph reported.

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**Previous lock-up expiries**
Facebook had unlocked big blocks of employee-held stock on two prior occasions– in mid August and in late October. In each of these cases the market has seen selloffs by Facebook employees and early investors cashing out, and the stock price slipping as a direct result. The first wave of 270 million shares contributed to a record low of $17.55 that Facebook stock price reached in early September, whilst the second pushed back the price by 3.4 per cent to $21.12. Facebook has fallen further since, eventually reaching $19.97 on Tuesday. But despite the expectations for an even bigger drop on Wednesday, the end of the third lock-up period saw the stock on the rise again.

**A change in the trend**
So far, despite making a massive 800 million block of shares available for sale (773 million common shares and 31 million restricted shares), the expiration of the third Facebook lock up period has told a different story from the previous two. In fact its stock price movement very much mirrors that of a review site Yelp Inc, which experienced a 20 percent increase in stock price in August under similar circumstances, The Telegraph says. According to Tim Ghriskey, chief investment officer at Solaris Group, this development can be attributed to the low price of the stock, restraining Facebook employees from selling. And with the fear of a massive selloff flooding the market wearing off, it’s understandable that the shares are pushing forward.

!m[](/uploads/story/839/thumbs/pic1_inline.png)The company is still a long way off the price levels from its initial public offering in May. Since the floatation Facebook stock value has decreased by almost 50 percent, mainly due to concerns about its long-term potential for generating revenue, particularly via increasingly popular mobile versions.

**Notable cash outs**
The end of the two previous lock ups has led to a series of stock sales by members of Facebook’s senior management. A board member Peter Thiel, who has been cited as the first investor in Facebook on numerous occasions, sold the most of his Facebook shares in August cashing in approximately £250 million. Another high-profiled sale of roughly 530,000 shares, worth over £7 million, was initiated this month by Chief Operating Officer Sheryl Sandberg. It’s been reported that Sandberg still owns about 20 million vested shares in Facebook after the sale.
Meanwhile, Facebook creator and Chief Executive Officer Mark Zuckerberg has committed his future to Facebook, pledging not to sell any shares before September 2013.


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