Facebook Withstands Lockup Expiration

Facebook, Inc. (NASDAQ: FB) could have seen its shares crushed on a lockup expiration, but the stock is holding up marginally well when you consider the entire situation. The social networking giant had a lockup expiration of more than 200 million shares occur on Monday when the markets were closed. In short, this was the first day that mor employees and insiders would have been able to sell their shares.

So, is a drop of 4% to $21.05 actually considered to be “holding up rather well” in reality? By our take, it is. The “good news” is that the reaction could have been far worse. That represents more than $4 billion worth of new stock which could have come out on the market. Of course those shares will not all be sold, but we have seen some 81 million shares trade hands already.

We would caution that this was the second such lockup expiration, and the big expiration of close to 1 billion shares of common stock is due in mid-November. Today’s drop is likely trying to factor in that flood of shares and seems more than likely that the trading volume will really surge as that lockup expiration comes up.

Facebook has now given back half of its post-earnings report gains since just last week. At $21.05, its 52-week trading range is $17.55 to $45.00.

JON C. OGG