CEO, Facebook, Mark Zuckerberg
Facebook Inc. (FB)’s stock plunge has robbed Goldman Sachs Group Inc. and Microsoft Corp. (MSFT) of much of the potential gain they could unlock as soon as this week, when a ban on sales of insiders’ shares begins to lift.
While the end of the lockup has the potential to put additional pressure on the stock price, owners such as Goldman Sachs (GS), which now has a stake worth about $900 million, face a dilemma: whether to sell now and realize a smaller profit or sit tight and risk further losses.
"It's not as if they have to sell all their holdings the moment the market opens," said Brian Wieser, an analyst at Pivotal Research Group, who rates the stock a buy. “They want to be rational about this.”
Still, over the coming nine months, about 1.91 billion shares will be freed up, compared with fewer than 500 million now available for trading. That flood of shares is a deterrent for some potential buyers, said Herman Leung, an analyst at Susquehanna International Group, said.
“It’s one of the No. 1 issues on investors’ minds right now,” Leung said. “Even the investors that I talk to who want to buy the stock and like the company are not sure if they can stomach the lockups.”
Investors including Goldman Sachs, Microsoft and Accel Partners, which together control more than 200 million shares in the owner of the largest social network, can begin selling them on Aug. 16 for the first time since the May 17 initial public offering, according to a regulatory filing. It’s the first in a wave of lockup expirations in the coming months that will quadruple the number of shares that can be traded.
Microsoft, based in Redmond, Washington, will probably hang onto its stake after the lockup-ban lifts, a person with knowledge of the matter said on Aug. 10. Microsoft views Facebook as a strategic partner in the combat against Google Inc. (GOOG), rather than as a near-term moneymaker, said the person, who requested anonymity because the plans are private.
Facebook, worth $52.7 billion as of Aug. 10, has lost about $38.8 billion in market value since the IPO, making it the worst performer among all large IPOs on record, according to data compiled by Bloomberg.