SAN FRANCISCO: Shares of Facebook Inc jumped as much as 11.2 percent yesterday, even as the biggest block of shares held by insiders became eligible for sale for the first time since the social media company’s disappointing debut in May.
Facebook shares were up 8.5 percent at $21.54 in heavy morning trade on the Nasdaq, off an earlier high at $22.09.
“While the lockup is expiring, there is nothing requiring anybody to sell,” said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York. “Given the low price, these long-term holders are deciding to hold the stock, and that is lifting it here as the fear of the expiration subsides.” Roughly 800 million Facebook shares were eligible for sale yesterday after restrictions on insider selling were lifted on the biggest block of shares since the May initial public offering.
The lockup expiration greatly expands the 921 million-share “float” available for trading on the market until now.
Facebook, the world’s No. 1 online social network, became the only US company to debut with a market value of more than $100bn. But its value has dropped nearly 50 percent since the IPO on concerns about money-making prospects over the long term.
Insider trading lockup provisions started to expire in August, and the rolling expirations have added to the pressure on Facebook’s stock.
Restrictions on Facebook insiders selling their shares have expired in waves. A restriction on more than 200 million shares expired on October 29.
Pivotal Research Group analyst Brian Wieser said he did not expect Facebook insiders to sell all of their shares as the lockups expired.
“I would expect heavy volumes over the next few weeks, but not undigestible volumes,” said Wieser. By his estimate, roughly 486 million of the nearly 800 million newly freed Facebook shares will be sold.
There is some evidence that the heavy interest in “shorting” the stock was dissipating, given the poor performance since it first sold shares in May. Investors who believe a stock will fall can bet against it by shorting the stock, that is, borrowing it and selling it in the hopes it will decline.
According to Markit’s Data Explorers, about 28 percent of the shares available for short-selling were being borrowed for that purpose, down from a high of more than 80 percent in early August.
Reuters
