While Facebook continues luring in more and more users (real or not, we don’t know), its stock continues slumping further and further.
On Thursday, following the expiration of Facebook’s lockup agreements, Facebook’s stock reached a record-low. It is likely that many of their early investors dumped some of their shares, which increased the volume of shares in the market catastrophically.
Lockup agreements are rules written by Security and Exchange Commission, which help in preventing insider trading. No share trading can take place during a pre-defined period. For Facebook, the period ended on Thursday.
That brings the tally of shares in the open market to 271 million, increasing the volume of shares by nearly 60%. Experts believe, as and when these lockup agreements expire, even more Facebook shares will become available.
Facebook shares dipped earlier this month, following the announcement that declared 83 million accounts on Facebook fake. According to some analysts, this can be the prime reason for the downfall in the stock’s market value.
According to Bloomberg, “The shares freed up today make up only 14 percent of the 1.91 billion that will be available for sales in the coming nine months”
If experts are to be believed, there is going to be huge increase in the number of Facebook shares in the market, which implies stock prices are going to decline even further.
For the record, the stock prices have never traded higher than its initial public offering price of $38 per share. Stock-prices always drop when lockouts expire; there is nothing new in that. But the manner in which Facebook prices have declined is remarkable. Perhaps, Facebook was blatantly overpriced during the launch and that is now taking the toll on the investors.
One has to question Mark Zuckerberg’s intentions in bringing Facebook to stock-exchange at a time when everything is in turmoil.
This is what Facebook CFO David Ebersman had to say on this, “We’re disappointed at how the stock has traded, but we’re the same company we were before.”
We believe, that’s the problem.