When the Facebook debacle debuted on May 18, or should I say when Facebook went public – as with many initial public offerings a “lockup” agreement was established by NASDAQ.
A lockup is an agreement that restricts shareholders from selling any shares for a specified period of time. In this case 3 months.
Normally – when the lockup restrictions are lifted, the market is flooded by the first sell-off stock. This is usually when the stock begins to tank.
So today, Thursday August 16, 2012 is the day that initial shareholders can start selling their stock. There is about 271 million shares, worth about $5.75 billion that are eligible to be officially sold today.
The reason for lockup agreements is to prevent the market from being flooded with too many shares immediately after an IPO.
NASDAQ placed a tiered lockup system on Facebook to slowly release shares into the market. Today is only the initial lockup release and more are coming over the next nine months.
Facebook has almost lost half of its initial offering value which debuted at $38 per share on May 18. The market will open today at $21.20.
I would not be surprised to see heavy trading volume today and expect the stock to close today somewhere between $15-$20, probably right around $17 per share.
It will be interesting to see who sells off stock today and in what quantities. Accel Partners, Goldman Sachs, Zynga CEO Mark Pincus and Facebook board members Mark Zuckerberg, James Breyer, Peter Thiel and Reid Hoffman are among those free to sell stock today. This will be a tell-tale sign of things to come.
It still amazes me how a $1 billion dollar company could be allowed to debut an initial offering over $104 billion dollars. That is the best company valuation I have ever seen. Many stock experts have indicated they suspect some form of criminal fraud occurred here.
If you would like, we provide a Free Technical Assessment, this can be beneficial to new and startup companies that are not sure where to start. You can always find our cloud and hosted services in the right column of this page or by simply going to our website at Raven Cloud Computing.