Over
the next few months when about 2 billion Facebook Inc (NASDAQ:FB) shares become
available for sale, on release of a lock-in, swamping the market the company’s
stock will be battered further, scotching any chances of a follow on offering
of shares.
There
are signs that inside investors would prefer to sell off their holdings rather
than freeze on to them as the company seems to be unable to evoke any cheering
sentiments.
What Technical
Charts Suggesting About FB. Get Free Trend
Analysis
The
stock has dipped close to 50 percent since its debut in May at $38 a share, in
an over-hyped IPO. It is sometimes the norm for companies on a fast-growth mode
to go in for a secondary offering of shares but in the present instance, with
investors preferring to dump the shares rather than buy them there seems to be
little likelihood of it.
The
company had devised the strategy of a timed release of shares in order to avoid
too much of its stock flooding the market at that time. However the release of
the lock-in could not have come at a worse time for the stock.
Analysts
expect that the stock could suffer from the effects of this excess liquidity
for up to a year.
In
fact prior to the stock's free fall, founder Mark Zuckerberg along with 12
other insider investors had sold over 240 million shares for a value worth $9.8
billion. The investors who bought them have about $5 billion of that worth
wiped out in the subsequent carnage that has followed.
Any
chances of investors recouping their losses will depend on the company charts
its future strategy of growth. Analysts have forecast a share price upwards of
$30 based on some optimistic estimates of its forward earnings. Investors can
always lower their cost of acquisition by buying up the shares at the current
depreciated value and then wait for the company to do something.
How Should
Investors Play FB Safely, Find In Our Free Report
Curiously,
despite all the incessant hammering of its shares, the stock is still trading at
33 times its forward earnings for the next year.
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