FB Lockup Expiration: Nothing to Fear?
Facebook (NASDAQ:FB) investors have learned from the social network’s last lock-up expiration that major stock releases do not always need to be viewed with fear. Now, with 156 million shares set to be released from lock-up on December 14, investors’ concerns appear to have diminished since November, according to Forbes.
Facebook’s Lock-Up Expiration History
Ahead of Facebook’s November 804-million-share expiration, which was the largest number of shares to be released since the company went public in May, investors believed that the company’s stock would become further depressed with the increased number of shares available for trading. At that time, Facebook’s stock was trading at roughly half of its initial offering price of $38 per share.
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Investors’ fears had a very real basis; when Peter Thiel, an early investor and a Facebook director, sold a large portion of his stake in August’s expiration, shares dropped down towards their all-time low. Furthermore, as Forbes reported, the last-minute increase of Facebook’s initial public offering “ended up contributing to a disappointing IPO.”
However, the social network’s position has changed over the past several months. Chief Executive Officer Mark Zuckerberg has increasingly focused on monetization efforts, and as evidence of that commitment, Facebook reported in October that sales had risen 32 percent to $1.26 billion in the third quarter. Since September, shares have gained 50 percent and after the November expiration they jumped above $20 per share.
CHEAT SHEET Analysis: Is this a Positive Catalyst for Facebook’s Stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. The 156 million shares that will be released from lock-up on Friday are a much smaller addition to Facebook’s float than the number of shares that were released in October and November. Given increased investor confidence in the stock and November’s precedent, Facebook’s last scheduled expiration is not expected to reverse the stock’s upward trend.
Although the company’s shares still trade approximately 27 percent below their IPO price, Forbes noted that “navigating through the share lock-up gauntlet is a huge milestone for the stock.”
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