Facebook released on Thursday for trading 271.1 million shares and the total number of shares available for stock market transactions increased by 60% to 692 million, boosting investors’ fears of increased pressure on prices, which are in place since listing. The shares were worth today $5.39 billion at the closing price of $19.88 on Nasdaq.
Investors who were shareholders before the listing: DST Global, Goldman Sachs Group, Elevation Partners and Accel Partners, received Thursday the right to sell some stakes they hold, according to documents sent by Facebook to Nasdaq, writes Bloomberg. Restrictions on sale, removed Thursday, aimed to avoid flooding the market with shares immediately after listing of the 421 million shares in May.
The prospect of new share sale means that Facebook will have to do more to convince investors that it deserves a higher price. Shares amounting to restrictions Thursday represent only 14% of the total 1.91 billion of shares that will be available for sale in the next nine months. “Fasten your seatbelts for the next few months until all these shares are cleared,” said Tom Forte, analyst at Telsey Advisory Group in New York.
Facebook CEO, Mark Zuckerberg, is not among the shareholders who were getting away from restrictions on Thursday. Facebook, with a stock value of $51.2 billion, lost about $40 billion of capitalization since its listing in May. Shares decline, however, was so strong that it could make some investors to maintain their holdings, rather than sell at the first opportunity, said Mark Harding, an analyst at JMP Securities. Facebook shares declined also because of proximity of unlocking a new set of shares, he added.
“Certainly it would not be in the interest of investors to sell shares all at once. I suppose that those who own the 270 million shares are rational investors and realize that flooding the market with such a volume of shares for a short period would not help their positions,” said Harding. Microsoft will not probably reduce its stake in Facebook, said this week, a source close to the situation. Microsoft considers Facebook a strategic partner in the fight against Google and not a short term investment.
Other investors were ready for a potential sale. Peter Thiel, who sits in the Facebook’s board of directors, sold shares at the IPO, and has given himself greater freedom to sell shares, according to a document sent to the stock exchange. Thiel, an early investor in Facebook, who acquired for $500,000 a 10.2% Facebook stake in 2004, turned 9 million Class B shares into Class A shares, which can be sold more easily on the capital markets.
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