Facebook entered the stock market with a bang, a highly publicized IPO and an initial rush to buy, followed by a dramatic plummet. The IPO is generally considered to have been a failure, with the buzz artificially inflating the stock price only to have it collapse to below half its original value shortly thereafter, pissing off lots of investors along the way.
But the stock could be on the road to recovery, as the lockups expire without flooding the market. A lockup is the period following an IPO when initial stockholders (employees, venture capitalists) are prohibited from selling off their stock. Lockups are put in place to prevent insider trading and precipitous drops in value as initial stockholders sell all at once, looking to flip the stock for a quick profit.
Facebook’s lockup began to expire in August, with more stock unlocking every few months and about 800 million shares opening up for trading last Wednesday. This could have caused another plummet for the stock value, but it didn’t. In fact, the stock has been on an upswing, indicating that consumer confidence in the tech giant is recovering from the disgrace of the botched IPO.
The future of Facebook’s value likely hinges on whether or not they figure out how to adequately monetize the presence of their over 1 billion users. They’ve done pretty well so far with ads on the site, but are still struggling to make money off of mobile use.
If enough of the initial stockholders hold on for now, instead of rushing to dump their stock, and Facebook focuses on successfully monetizing mobile use, the stock could potentially approach its $45 high. Today’s high was $24.42, and the all-time low was $17.55.