Facebook Inc shares sank as much as 7.1 percent to a record low after early investors got the greenlight to sell for the first time since the No 1 social network went public, starting a string of insider lockup expirations expected to pressure the stock for months.
More than 270 million shares owned by early investors became available for trade on Thursday. That's more than half the 421 million shares sold in the May initial public offering. Investors were also unnerved by the prospect of about 2 billion new Facebook shares hitting markets by year's end, tripling its shares available for public trading. Most Facebook employees can start selling their shares in November.
With Thursday's selloff, Facebook has lost $40 billion, or just under 50 percent, of its market value since its IPO on May 18. The stock, which debuted at $38, hit a session low of $19.69 on Nasdaq, before trading down 5 percent at $20.13 early Thursday afternoon.
"Pressure will be back on the shares now that liquidity is back in the market," said Frank Davis, director of sales and trading at LEK Securities in New York. "If (the value of) your holdings has been cut in half, are you going to sit around and risk the rest of that?"
Facebook has been wildly volatile, moving more than 3 percent in most sessions. Roughly 64 million shares of Facebook changed hands in the first hour of trading on Thursday, more than double its 50-day daily average of just under 30 million shares. Analysts said it wasn't clear whether the selloff was actually driven by insiders or by other shareholders worried about potential insider selling. Among the largest blocks of shares now available for trading are about 75 million shares owned by Russia's DST Global Limited and Mail.ru. Other potential sellers include venture capital firm Accel Partners and PayPal co-founder Peter Thiel.
"I don't think you're going to see all the supply come to market on Day One. People will wait until they think there will be a little bit of a price lift," said Evercore Partners analyst Ken Sena. Founded in a Harvard dorm room in 2004 by Chief Executive Mark Zuckerberg, Facebook has become the world's No 1 Internet social network, challenging established Web giants.
With Facebook's stock trading at $20, Zuckerberg, 28, who controls a majority of the company's voting power, has now watched more than $9 billion evaporate from his net worth. Another 243 million shares will be released from lock-up between mid-October and mid-November.
On November 14, more than 1.2 billion shares will be available for trading. Mark Zuckerberg will not be able to sell his shares until then. Short interest figures calculated by the Nasdaq Stock Market, which is released on a lagging basis twice a month, shows 61.3 million shares were shorted as of the end of July; the newest figures on short interest will not be released until August 24.