There is not likely to be much impact, of the 271 million Facebook Inc (NASDAQ:FB) shares that will be released from a lock-in on Thursday, on the company's stock that has already been battered down about 45 percent from its May debut price.
The low price at which its shares are ruling may actually work in its favour as the early investors, who are now free to sell their locked-in shares, may opt not to sell but wait for the company's fortunes to revive.
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Uncertainty over future growth prospects of the company and its ability to sustain revenue momentum from marketers have been the main reason behind the stock's poor performance. Its second quarter results, and the first it made public after its IPO, showed that its revenues growth had slowed and its earnings were lower than expected.
The No. 1 social network also failed to provide guidance for the year and this has added to the uncertainty in the market. Facebook shares closed at $21.20 on Wednesday.
"If Facebook was trading at $30, we would see a much larger effect from the lockup expiry. But at $20? Not so much,” Steve Place, a founder of options analytics firm investingwithoptions.com in Mobile, Alabama told Reuters.
The derivatives segment, especially options trading indicate a move of little more than 6 percent by Friday - more investors expecting a dip in shares than a rise, but this is nothing out of the ordinary.
The big investors whose holdings will be released from the lock-in are Accel Partners, DST Global, Microsoft Corp and hedge fund investor Peter Thiel.
Thiel, who had sold a portion of his holdings at the time of the IPO, is already known to have converted some portion of his shares from Class B to Class A shares that are easier to sell in the market.
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Thiel and Accel were among the earliest backers, so they're likely to make a big profit. Microsoft invested $240 million in 2007 at an assumed valuation of $15 billion for Facebook; at its current stock price the company is worth about $45 billion. DST bought shares at different prices, Reuters said.