Sunday, October 7, 2012

Facebook Inc (NASDAQ:FB) faces tough test in confidence on Oct. 29

Facebook Inc(NASDAQ:FB) stock has been drifting of late in a direction-less way with nothing much to cheer it up while it reacts in a lack-lustre way to very bit of news that points to the founders and management trying to boost its revenues.

When Facebook announced on Thursday that it had reached a billion users, it hardly created a flicker. The question which was on everyone’s lips was - what are these users doing?

The one billion users like the platform for sure, but they do not want to buy anything, which is what Facebook and the advertisers on the site want them to do.

Come October 29 and the company has another serious problem on its hands. About 243 million shares held by employees will be released from lock-in and become eligible for sale in the market.

This is going to be a real test of confidence for the company.

When the first lock-up expired on August 16, a good chunk of the 271 million shares hit the market as investors couldn't wait to offload their holdings the value of which had gone down by close to half.

Since then there have been brief spurts in the stock, most notably when founder Mark Zuckerberg made his fleeting public appearance and had answers to all the difficult questions that investors and analysts wanted him to answer.

Prior to that, he had pledged that he would not sell any of his own shares that were released from lock-up.

At this point Facebook employees' decisions on October 29 present the most important confidence signal remaining for investors.

If Facebook employees hold on to their shares it will serve as a positive signals not only to small investors but also to others and may well set the course for future expirations.

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