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How low will Facebook shares go? 'Lockup' expires, stock plunges

August 16, 2012|By Jessica Guynn
  • Investors are not giving Facebook shares a thumbs up. Above, the company's headquarters in Menlo Park, Calif.
Investors are not giving Facebook shares a thumbs up. Above, the company's… (Peter DaSilva / EPA )

Facebook shares were supposed to do the lambada, not the limbo.

Instead stock in the social networking giant, whose contortions have demoralized investors, sank to a fresh low on Thursday, losing more than $4 billion of market value after the first in a series of "lockups" expired that had kept insiders from selling their shares.

Facebook shares plunged as much as $1.49, or 7%, to $19.71 in Thursday morning trading. It’s getting close to losing half its value since its much-hyped initial public stock offering in May that put its value at $100 billion.

Facebook already had 421 million shares trading. On Thursday 271 million more became eligible to be bought and sold. If many insiders sell, that could put increased pressure on the already depressed stock. Facebook's stock is close to doubling its usual trading volume with about 84 million shares trading hands already Thursday.

It’s not yet clear whether the sharp selloff was actually insiders selling shares or other shareholders selling on concerns that insiders would dump their shares. But if this keeps up, Facebook shareholders are going to need some Prozac.

Facebook has a staggered lockup system. So the pain isn’t over. The big kahuna: On Nov. 14, more than 1.2 billion shares will be available for trading. That’s when Facebook Chief Executive Mark Zuckerberg can sell his shares.

Facebook has been hammered over concerns about slowing revenue growth and its long-term potential as a moneymaker. It’s not alone. The much ballyhooed social networking sector has fallen out of favor with investors.

It has a lot to prove to Wall Street between now and November.

FB Chart

FB data by YCharts

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