Econintersect: Facebook (NASDAQ:FB) shares fell another 6.3% Thursday (16 August) under selling pressure from the addition of 271 million shares of the stock to the shares already on the market. The additional shares came from removal of restrictions that kept them "locked-up" for 90 days following the May 18 IPO. Most of the shares released from the trading restriction were held by early investors in the company: venture capital firms and other corporations such as Microsoft (NASDAQ:MSFT) and Goldman Sachs (NYSE:GS). The shares now eligible for trading increased the shares "in the market" by more than 15%.
Follow up:The disruption of price on August 16 is not likely to be the last that the market will experience from removal of restrictions on stock that that is still locked up and can come to the market for trading in the coming months. The number of shares available for trading will more than double from the IPO date (18 May 2012) over the next year, with the vast majority being added to the market between August and November.
The possible forces this massive addition of stock could put on the price movement of trading is discussed in an article at the GEI Investing blog. The effects could be either positive or negative, or possibly both in volatile trading.
Here is the three month swan dive for FB:
- Facebook Summary (Yahoo Finance, 16 August 2012)
- Facebook falls to record low as lockup expires (Benjamin Pimentel, MarketWatch, 16 August 2012)
- Facebook Falls Below 20! More to Come? (John Lounsbury, GEI Investing, 17 August 2012)