Published: August 16, 2012
At one point today, Facebook's stock price sunk to a new low. At about $19.69, it was worth about half of what it was initially sold for in May.
Bloomberg explains that what is happening is that early investors in the company — including founder and CEO Mark Zuckerberg — were allowed to sell some of their stocks for the first time today.
"The prospect of more stock sales means Facebook will need to work even harder to convince investors that it deserves a higher price, relative to earnings, than all of its U.S.-based competitors, except for LinkedIn Corp. (LNKD) The shares freed up today make up only 14 percent of the 1.91 billion that will be available for sales in the coming nine months.
"'Buckle your seatbelts for the next couple of months until they make it through all these shares coming unlocked,' said Tom Forte, an analyst at Telsey Advisory Group in New York.
"Early Facebook investors such as DST Global Ltd., Goldman Sachs Group Inc. (GS), Elevation Partners and Accel Partnerscan start selling part of their holdings today, Menlo Park, California-based Facebook has said in filings. That's after the lifting of restrictions, set with underwriters, that are designed to prevent a flood of shares immediately after an IPO."
USA Today says that the price drop may not necessarily mean that the insiders are unloading stocks. It could be, explains the paper, that other investors sold expecting the insiders to sell.
"It's been a rough run for Facebook," reports USA Today. "After one of the most-anticipated IPOs in history, Facebook suffered what may be the most-botched public offering as trading glitches marred its first day. It's been almost all downhill for the Menlo Park., Calif., company since then."
For a graphical look at Facebook's performance, Yahoo! has a historical chart. [Copyright 2013 NPR]