Shareholders sold their shares of Facebook, as a result of the end of the first lockup resulted in. As anticipated, the social media company’s stock decreased in value—by six percent. This is the beginning of Facebook’s gradual release of shares.
Facebook warned the market yesterday that there would be a downturn on Thursday. Accel reportedly distributed a big portion of its stake to limited partners who then sold, and Facebook still has to endure the November expiration when long-time employees gain the freedom to sell, according to TechCrunch.
The tech news site reported that about 271 million shares became eligible today from investors such as Microsoft, Accel Partners, Tiger Global Management, Goldman Sachs and Peter Thiel.
CEO, Mark Zuckerberg, gathered staff to discuss the issue before of the release of shares, which cut Facebook shares to just $19.87, almost half their $38 flotation price, The Telegraph attributed to The Wall Street Journal.
Until the IPO in May, Zuckerberg publicly professed little interest in the value of his creation and encouraged staff who had been awarded generous share options to adopt the same focus on developing it products, according to The Telegraph. He posted a picture saying “stay focused, keep shipping” on his Facebook profile on the day of the flotation.
The news source reported that he was forced to acknowledge Facebook’s “painful” stock market hammering. However, many employees whose options were issued at a higher price than the shares are currently trading at remain unable to trade their share as the rest of series of lock-in periods remain in force.
Thursday’s new low meant Mr Zuckerberg’s personal fortune has been slashed to about $10bn, down from estimates of almost $20bn in May, according to the Telegraph.
Though the company has a long way to go to raise the price, it also has a long way to fall.
In order for its stock price to go up, Facebook has to convince Wall Street analysts and investors that the personal data its 955 million users share about themselves can be better used to make money, the New York Times states. Advertisers are not convinced that Facebook ads are more effective than online ads appearing elsewhere, despite having information about users’ habits and interests.
There has been criticism that its shares were overvalued by bankers from the start. In July, early results revealed a revenue growth slowdown and an overall loss of $157m.
“All the lockup is doing is enabling people to sell,” Richard Greenfield, a media analyst with BTIG, a brokerage firm, told the Times. “The issue is still confidence in Facebook’s transition from the PC to mobile.”
According to the Telegraph, Facebook has admitted it is threatened by the growth in smartphones and tablets as it has not worked out a strategy to make money from its mobile apps or mobile website.