Facebook Inc (NASDAQ:FB) shares jumped 19 percent on Wednesday on the back of quarterly results which showed that the company was making money from mobile ads.
But come October 29 and more than 200 million shares of the company will be released from lock-up and will be eligible to be sold in the market.
In fact more than a billion shares are set to flood the market in coming weeks in a staggered fashion - assuming of course, that investors would still like to rid themselves of the shares.
Called restricted Stock Units, there shares are meant to retain employees by giving them ownership in the company and to participate in its growth. However when these shares are allotted to employees at time of the IPO, there are placed under a lock-in for a specific period of time, the idea behind this being that they should not sell the shares at the time of listing and adversely affect the share price performance.
Now that the company has shown that it is able to monetise its huge mobile user base and get revenues from mobile ads, it is quite possible that investors may hang on to their holdings in the hope of further appreciation in the stock price.
On Tuesday the company reported quarterly earnings which surpassed estimates and mobile ad revenues came in at a good tick contributing about 14 percent to total ad revenues.
The limited space on mobile devices makes it much more difficult for Facebook to insert its desktop ad product into the stream without feeling obtrusive.
Chief executive and founder Mark Zuckerberg has achieved what he set out to do - dispel the myth that Facebook can’t make money in mobile.
The social media site has kept investors' faith in it. Now it is up to the investors to return the favour and exhibit their confidence.