Facebook’s Plummeting Stock Price
Janet Tavakoli on FB. Yes, she is long puts on FB, but this is worth reading. The social media bubble is still imploding….
Will Facebook soon be a $5 stock? Facebook has seen a tsunami of selling by insiders since May 17 when its IPO raised $16 billion for insiders, early investors, and the firm. Its share price nosedived from $38 to $19.52, around half its IPO price, as of close of business on October 15. There will be even stronger downward price pressures on the stock before year-end.Investors who bought when Facebook was still private sold enough shares at the IPO to make many multiples of their original investments: Goldman Sachs, Greylock Partners, and Microsoft combined sold 38.5 million shares for more than $1.4 billion. Peter Theil invested $500 thousand in Facebook; since the IPO he’s sold all but 5.6 million of his original 44 million in stages to cash out around $1 billion. That’s just so far. It looks as if there’s an even larger tsunami of selling coming before year-end as lockups expire on restricted shares. Most belong to Facebook’s employees, and Facebook will have to sell shares to cover employees’ tax bills. CEO Mark Zuckerberg sold $1 billion worth of his shares at the IPO to cover his own tax bill.Facebook’s IPO was 421 million shares. In August, the lock-up for 270 million shares expired (60% additional shares), and Facebook fell 7% to hit what was then an all-time low of $19.88 per share. But the worst is yet to come. Before year-end, the lock-up for more than 1.5 billion shares expires. Look out below.
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