Facebook: Watch Out for This MAJOR Sale

Facebook (NASDAQ:FB) investors including Goldman Sachs (NYSE:GS), Microsoft (NASDAQ:MSFT), and Accel Partners can begin selling their combined total of 200 million stock options in the social network on August 16, when a ban on sales of insiders’ shares ends. It will be the first in a cascade of lockup expirations in the coming few months, which are together expected to increase the available number of Facebook shares that can be traded by four times.

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Over the next nine months, about 1.91 billion shares will be freed up. Fewer than 500 million are available now for trading. The excess of shares at a time when the company’s stock price has been plunging is worrying investors. It is even a deterrent for some potential buyers, Herman Leung, an analyst at Susquehanna International Group, told Bloomberg. “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.”

Facebook has lost about $38.8 billion in market value since its IPO of May 18, making it the worst performer among all large IPOs on record. The company’s shares were at $21.81 at the close of trading on Friday, compared with the IPO price of $38. The stock has suffered from continuing doubts about the social network’s growth potential and the sustenance of its revenue streams.

Of the 268.1 million shares that are set to be freed up on August 16, Pivotal Research Group analyst Brian Wieser estimates about 55 percent could be sold. After lockups end, shares at some venture capital firms may also be automatically distributed to the firms’ own investors, possibly leading to more selling, Jay Ritter, a professor of finance at the University of Florida, told Bloomberg.

Other large early investors in Facebok include Russian Internet company Mail.ru Group, Russian investment company Digital Sky Technologies, Facebook co-founder Dustin Moskovitz, and Zynga (NASDAQ:ZNGA) chief executive officer Mark Pincus.

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