Investors in Facebook, who are still reeling from the social
network's disastrous stock market debut, are expecting further losses,
as a ban on early backers selling their shares would be lifted this
week.
A flood of shares of about 1.9 billion, four times the
current publicly traded number, will be released from "lockup", which
could further depress stock prices.
"It remains a real risk that
shares will be sold on to the market and temporarily depress prices as
the market could struggle to absorb an expanded float," The Guardian
quoted Brian Wieser of Wall Street research group Pivotal, as saying.
Facebook's
high-profile owners, which include Microsoft, Goldman Sachs to U2
frontman Bono's venture capital fund Elevation Partners, would be free
to sell the billions' worth of securities, which they held back from the
initial public offering (IPO) in May.
According to the paper, the
major threat to Facebook shares, whose value has fallen 40 percent in
the three months since their debut at 38 dollars at NASDAQ, comes in
November, when 1.2 billion shares, many of them belonging to employees
and venture capital firms, are released from their trading moratorium.
Pivotal believes that these types of investor could decide to sell up to three-quarters of their holdings.
"This
date becomes the greatest wildcard," Wieser said, who believes that a
lot depends on Facebook's next set of financial results, expected in
October, which should show an acceleration in its rate of growth that is
likely to continue until Christmas and beyond, as the company expands
its sources of advertising revenue.
"They may be able to navigate
through this. The more they can convince Wall Street of the merits of
their story, the more they are likely to generate demand for the
shares," he added.
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