Facebook rocked after locked shares begin trading

Death by dislike.

Facebook’s 6.3% drop on Thursday, after the end of restrictions on share sales by its biggest investors, was the second-largest post-lock-up decline among companies that have gone public since January 2011. Only social-game maker and partner Zynga (ZNGA) has tumbled more, losing 7.9%, on the first day that insiders could start selling their stakes. That was the largest one-day post-lock-up descent among the 20 biggest initial public offerings since January 1, 2011.

With Thursday’s stock swoon, Facebook’s IPO now ranks as “the worst performer among all large IPOs on record,” according to data compiled by Bloomberg. The slump left Facebook at a record low after a 60% increase in the number of shares available for trading.

Under restrictions worked out with IPO underwriters, early investors agreed not to sell their holdings for a preset period after a market debut to keep from flooding the market with shares. The shares freed up represent 14% of the 1.91 billion that will become available for sale in the coming nine months.

The next expiry comes between Oct. 15 and Nov. 13, when restraints are removed on about 243 million shares. Lock-up expires on about 1.2 billion shares on Nov. 14, and for 149.4 million shares a month later. A final round comes May 18, 2013, with 47.3 million shares becoming available.

Facebook (FB : NASDAQ : US$19.05), Net Change: -0.82, % Change: -4.14%, Volume: 109,687,333

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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