Facebook Insiders' Stock Gets Unlocked, and Its Share Price Unloads

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UPDATE, 3:20 p.m.: As many doomsayers expected, shares of Facebook (FB) came under heavy pressure on Thursday. The stock opened nearly 4% lower and traded as much as 7% lower -- scoring a new bottom price of $19.69.

The end of the IPO's lock-up requirements for many of Facebook's early investors triggered a wave of selling in the stock of the world's leading social networking website with more than 955 million users.

Now we don't know if any insiders are actually selling. We'll have to wait for SEC filings in the coming days to see if any material investors have lightened their positions. Thursday's selling is more than likely just retail investors trying to cash out ahead of the potential sale of stock by pre-IPO investors that now have that option available to them.

Facebook can't seem to catch a break these days, that's for sure. Late Thursday afternon, the stock was trading below $20, barely more than half of its May IPO price of $38 a share.

Don't be surprised if Facebook (FB) investors begin laying off on status updates and instead start refreshing stock quotes for the world's most popular social networking website operator.

After three months of largely lethargic trading, many longtime Facebook stakeholders could begin unloading their shares on Thursday.

It's called the end of lock-up restrictions. In order to achieve orderly IPOs, underwriters have insiders and venture capitalists agree to not sell their positions for the first few months of a stock's publicly traded life.

Different early investors have different lock-up requirements. In Facebook's case, Thursday isn't the only expiration. Other investors won't be able to sell their shares until November, and some must hold them until next May.

Investors are naturally apprehensive about the end of lock-up restrictions. Sometimes insiders sell in droves. Shares of premium referral service Angie's List (ANGI) plunged on Tuesday when its lock-up period ended.

However, early investors don't have to sell. Many probably won't, or at least not right away. In Facebook's case, seeing the stock trade for a little more than half of its May IPO price of $38 at the moment may be enough to ease some of the selling pressure.

Then again, no one knows how a stock will react to the expiration of an IPO's lock-up requirements until it happens.

Other Things Worth Watching

• Networking equipment giant Cisco (CSCO) posted better than expected results on Wednesday after the market close. Cisco also decided to push its quarterly dividend 75% higher. Cisco has been a Wall Street laggard over the past decade. Its failures in consumer products -- fare thee well, Flip camcorder -- didn't help. However, every turnaround starts with a company turning around. Cisco appears to be doing that right now.

• PetSmart (PETM) saw its earnings soar 31% in its fiscal second quarter. The retailer of pet supplies and provider of veterinary services was fueled by a robust 7% surge in same-store sales. A chorus of purring kittens and grateful pooches probably didn't hurt either.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Cisco Systems and Facebook. Motley Fool newsletter services have recommended buying shares of Facebook and PetSmart.


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wileytiger

To be more upfront about the whole mess, I think its either another 1.2 billion or 1.8 Billion shares will be released in Nov

August 22 2012 at 2:27 AM Report abuse rate up rate down Reply
goldaxe

When you jump out like king of beast ,you have to eat up small high revenue money making companies that fit into your company well. They add to earnings,revenue,and make the company attractive to investers.You cant feed A T-REX doggie treats,and expect it to thrive.

August 18 2012 at 1:56 AM Report abuse rate up rate down Reply
jdykbpl45

It should be called pump and dump!

August 17 2012 at 3:31 PM Report abuse +1 rate up rate down Reply
Intraday Profit Tips

So weak to hold...Investors can sell at current price and chances to go still 10%-15% of downside.

August 17 2012 at 1:57 PM Report abuse +1 rate up rate down Reply
ilm9p

Facebook is a sillyass company designed by a sillyass fink for a whole generation of sillyass finks. It’s blue smoke and mirrors. It provides nothing, it does nothing, and it’s used primarily by people who have nothing else to do. Where’s the value in that?

August 17 2012 at 9:43 AM Report abuse +3 rate up rate down Reply
percheron1

Well we've almost reached my $15/share prediction...

August 16 2012 at 5:21 PM Report abuse +2 rate up rate down Reply
Frank

After just checking the stock price ( down 6.5% ) and volume it looks like people are selling.

August 16 2012 at 10:47 AM Report abuse +1 rate up rate down Reply