Facebook CEO, Mark Zuckerberg
Facebook Inc. (FB) shares, which fell to a record low after insiders could sell stakes for the first time since the initial public offering, will face more pressure when another 1.44 billion shares are freed up through November.
Facebook last week unlocked 271.1 million shares, the first of five insider sale restrictions scheduled during its first year as a public company.
Bloomberg reported that while Facebook Chief Executive Officer Mark Zuckerberg operates the world’s largest social-networking service, he’s facing investor concerns about how it can generate more revenue from its growing user base. That, plus the end of the first lock-up, drove the shares to half the offering price of $38, wiping out almost $46 billion in market value.
“Is this something impatient or nervous investors should be worried about?” said Herman Leung, analyst at Susquehanna International Group. “Yes, but for the long-term investors, I view this as an opportunity to potentially get a stock at a pretty good price.”
Regulatory filings as soon as this week will disclose how many major shareholders sold their stock. Insiders are seen selling about 55 percent of the 1.2 billion shares that are set to come unlocked on Nov. 14, according to an Aug. 9 research note by Brian Wieser at Pivotal Research in New York.
Hedge funds that are using so-called short sales to benefit from the stock’s decline may be active ahead of mid-November, said Jay Ritter, professor of finance at the University of Florida. These investors will probably sell shares with the aim of buying them back at a discount at a later date, he said.
“There will be selling pressure before the Nov. 14 lockup expires,” said Ritter, based in Gainesville, Florida.
Ashley Zandy, a spokeswoman for Menlo Park, California- based Facebook, declined to comment.
The shares dropped 4.1 percent to $19.05 at the close in New York on Aug. 17. Just before trading ended, Facebook touched a record intraday low of $19. More than 129 million shares were traded, after 157.6 million a day earlier when the lock-up expired, above the daily average volume of 48.7 million.
By May the number of shares on the market will increase by 1.91 billion, compared with 421.2 million shares at the IPO.
Facebook’s first earnings report as a public company last month also fueled concerns over how quickly it can draw revenue from mobile devices. Second-quarter revenue grew 32 percent from a year earlier, down from 45 percent in the first quarter.
Facebook’s mobile advertising services are a key concern for investors as more users turn to tablets and smartphones. The company should benefit in the coming months from new tools and services that help companies market their wares to users on the go, said Scott Kessler, an analyst at S&P Capital IQ.