As D-day nears for Facebook Inc (NASDAQ:FB), Wall Street is getting
more nervous at the prospect of more shares flooding the market. From Thursday
about 2 billion shares in the company will be released for sale in the market
by pre-IPO investors as the lock-in on those shares expire.
Of course, it is not necessary that all those shares
will come into the market as the investors may want to freeze onto it. We have
to remember that Facebook shares have declined more than 40 percent since it
debuted in May at $38 a share.
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We also have to assume that these investors - who are
seen as anchor investors in the company - would be looking at their investment
as a long-term play.
In the first tranche about 271 million shares will be
released, held by investors who had already sold in the IPO. Founder Mark
Zuckerberg cannot sell as his shares are locked in till November. A few of the
others such as DST Global and Mail.ru Group can sell only a limited number of shares.
Apart from Zuckerberg the other big investor is Accel
Partners, which holds about 152 million Class A and B shares
The problem is whether investors are willing to wait
it out till Facebook gets its act right. As its second quarter results showed
the company is facing slowing revenue growth and it has to yet come out with a
good strategy to reassure its investors.
Instead it has announced plans to offer gambling
services to its users in those countries that permit it.
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After Its Recent Slump Find Here
It also said in a filing that moving to mobile ads
would hurt its margins as the rates for these are lower compared to traditional
ads on the web.
Shares of FB gapped up by over 4% to $21.24,
recovering from its yesterday’s fall of 5.50%.
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