Facebook Inc(NASDAQ:FB) founder Mark Zuckerberg was brought face to face with a painful reality on Thursday. The social network that he has built up and which runs on people using the platform to share their photos and experiences has failed to inspire confidence in those people who matter the most - the investors.
Early stage investors who were freed from the lock-in of their shares on Thursday, took the first opportunity they could to sell their holdings, despite the fact that the stock has dropped nearly half its value from its debut on May.
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Zuckerberg has so far been fairly stoical about the fall in his share prices, exhorting employees not to pay attention to the carnage on the Street but to what the company is doing to boost revenues.
At a meeting last month to infuse much-needed enthusiasm into employees' sagging morale, he had conceded that a sell-off of shares could hurt the company and it was `painful' to watch what was happening.
On Thursday, about 271 million shares came into the market, following the planned expiry of a lock-in and those who held those shares lost no time in offloading some part of it.
Facebook shares hit a new low on Thursday sinking to $19.87 on selling pressure.
These early investors, whose shares became eligible for sale, included such big names as Accel Partners, Goldman Sachs, Microsoft, Greylock Partners and Zynga CEO among others.
The release of locked-in shares has been staggered over the next three to four months in order to avoid flooding the market with too many shares of the company. The biggest expiration is to occur on November 14 when Zuckerberg himself will become eligible to sell his shares.
Some mutual funds that had invested just prior to its IPO are showing losses according to regulatory filing made by funds such as T Rowe Price. Those who had bought as early as in 2010 could still hope to break even on their investments. These include investors such as Goldman Sachs and Russia's DST who had invested at about $20.85 a share.
According to data available from the exchanges, more than 156 million shares changed hands on Thursday, which was more than four times the average daily traded volume for the stock.