Facebook's (FB) stock plunged to a new low on Thursday after the expiration of a ban, known as the “lock up period,” that prevented early investors from getting rid of additional shares owned since the social network’s May 2012 controversial IPO.
Facebook shares traded for as low as $19.69 this morning, before bouncing back to $19.91 in midday trading Thursday. That's 6% (or $1.29) down from Wednesday's close; and 48% below its IPO price of $38. By noon, nearly 100 million shares (more than three times the average volume on a full day) had traded. If the stock dips to $19 or below, the company will officially loose half of its value.
Firms ranging from Accel Partners to Goldman Sachs, Zynga CEO Mark Pincus and Facebook board members James Breyer, Peter Thiel and Reid Hoffman were among those free to sell stock they own. If many of them decided to dump their shares, Facebook's stock could decline even further as the market would be "flooded" with more shares.
Those eligible to sell stock on Thursday were the investors and directors who had participated in the May IPO, with the exception of CEO Mark Zuckerberg -- whose lock up period is set to expire in November.
Investors have been concerned about Facebook's ability to keep increasing revenue and make money from its growing mobile audience -- even as many analysts hold positive long-term views. However, as the lock up period (necessary to prevent early investors from unloading shares too close to an IPO, which would have ensued further volatility) comes to and end, the young company will have to face the realities of investors still anxious about the social network's prospects.
Besides the November lock up period expiration, when CEO Zuckerberg will be able to "dump" some of his own shares, other Facebook shareholders -- including its employees -- will be able to sell beginning in October. The last lockup period expires next May, a year after the IPO.