Facebook Hits Record Low: More Ugly Truths for Shareholders

Facebook (NASDAQ:FB) can’t seem to catch a break. On September 4, Morgan Stanley (NYSE:MS) analyst Scott Devitt cut his 12 month price target for the company by 16 percent, from $38 to $32. Then, J.P. Morgan (NYSE:JPM) analyst Doug Anmuth also cut his 2013 Facebook price target by 33 percent, from $45 to $30. The reaction to this was a new low for the stock, hitting $17.55 before closing at $17.73.

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However, Facebook released an 8-K to the SEC just after markets closed. The stock climbed almost 2 percent to $18.08. The company had originally planned to pay for taxes associated with pre-2011 restricted stock units through a secondary offering of up to 122 million shares to the public. In an effort to stabilize the share price, Facebook decided to pay cash instead.

CEO Mark Zuckerberg and board members Marc Andreessen and Don Graham “have no present intention to sell any stocks.” This move seems to have inspired some confidence in investors, but the future of the company and the stock is still uncertain. Other investors such as Peter Thiel have been dumping shares, so Facebook’s stock isn’t getting any points for our CHEAT SHEET investing analysis of “S = Support is Provided by Institutional Investors and Company Insiders.”

Recent attempts to clean up its monetization efforts and the fact social network use through mobile devices is growing are good signs, but Facebook has two months to prove itself. The early employee lockup expires just six days after Facebook will announce it third quarter financial results on October 23, and November 14 sees the rest go free. After that, Facebook will have to worry about way more than 122 million shares flooding the market.

Now check out our analysis of Facebook’s stock >>