Facebook was in for a rude shock as its shares plummeted last night when some investors who had initially backed the social networking company, cashed out their holdings, after almost three months of Facebook’s disastrous debut in public markets.
Overnight, almost 271 million additional shares became available for purchase, and the rush of sales pushed the stock price down to almost half the float price. In the first hour of trading itself, more than twice the average daily volume of shares had been sold. The stocks plunged to a new intra-day low of $19.69 (£12.51), valuing the company at $54 billion (£34 billion), compared to $104 billion (£66 billion) at $38 (£24) per share at its debut.
The huge volume of trading which was seen after Nasdaq opened for trading yesterday indicated that some early investors, who had been prevented from selling their shares for 90 days after they had sold some of their stake in May, were taking the first available opportunity to back out. Facebook executives have been trying to persuade the early investors to hold back from taking advantage of the expiry of the lock-up, in a series of meetings over recent days.
Accel Partners, a venture capital firm, which had invested in Facebook in its early days when the company used to call itself by the name “thefacebook.com”, Goldman Sachs, Microsoft and Elevation Partners and other angel investors include the PayPal founder Peter Thiel, and LinkedIn’s Reid Hoffman, are all the investors who are eligible to sell more of their stock holdings. Mark Zuckerberg, whose stake in the company dropped to $10 billion from $19.1billion at the time of the flotation, was not eligible to sell any stock yesterday.