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Will Facebook See A Mass Sell-Off After Shares Halve In Value?

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FACEBOOK SHARE SELL OFF
Will investors panic and sell up their shares? | PA

Thursday is the day when people who bought the first round of shares in social networking giant Facebook can sell their holdings but views are mixed as to whether disgruntled shareowners will sell up when the price is so low.

An extra 271m shares will hit the market today as the first ‘lock-up period' – when pre-floatation investors are obliged to hold onto the stock for a certain time – ends.

Facebook has lost about £25bn in market value since the IPO, making it the worst performer among all large IPOs on record, according to data compiled by Bloomberg.

The site has also come in for criticism after trials placing advertisements directly into users' news feeds in an effort to boost Facebook's coffers were almost universally 'unliked' by its users.

The trial lets advertisers pay to show their posts to people who didn’t subscribe to them, according to TechCrunch. Previously, these 'Pages' could only reach those people who weren’t fans through ads in the web sidebar or Sponsored Stories noting their friends had interacted with the Page.

Some Twitter users were particularly cynical about today's sell-off

And in more troubling news, three of its top executives have announced they are quitting the social networking company.

Director of platform partnerships, Ethan Beard, director of platform marketing, Katie Mitic, and mobile platform marketing manager, Jonathan Matus, handed in their resignations earlier this month, according to a report in the Daily Mail.

Views are mixed as to whether this afternoon's market opening in the US will result in a mass sell-off of shares. This is because the share price has dropped by some 45 per cent since the IPO, meaning some investors would rather hang on and hope the value of their shares recover in the coming months.

However, others may feel that it's better to sell up now and crystallise that loss, to prevent it from getting any worse.

It's also worth noting that the lock-up on employees and other directors’ shares, some of which were given to them for next to nothing, don't expire until November, resulting in 1.2bn shares coming onto the market.

Merger and acquisition firm Magistor Advisors suggested the crash in Facebook's share price could lead to other tech stocks considering joining forces before venturing into their own stockmarket flotation.

Victor Basta, managing director at Magister Advisors, said even Facebook itself could be looking for a partner.

“Facebook is currently valued by the market at around a quarter of the value of Google. If the share price drifts any lower, Facebook starts to answer Google’s questions about its social media strategy at a compelling value. Clearly there would be regulatory issues, but a deal would be compelling for both sides,” he said.

"IPO markets were expecting Facebook to be the tide to lift all social media boats. In hindsight it’s looking like a Thelma and Louise moment instead.”

Basta added it was unlikely Twitter would IPO in the near future too, sine it is finding it very hard to monetise its user base.

"It very clear that the investor community is now solely focused on how these companies make money, quickly," he concluded.
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Around the Web

The Facebook IPO – US Business News - CNBC

Facebook investors brace for further losses | Business | The Guardian

Facebook Director Thiel Gets More Flexibility to Sell - Businessweek

Facebook insiders can sell stock as 'lock-up' ends

Apple Officials Said to Consider Stake in Twitter

Facebook shares down ahead of earnings report

 
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