London - Facebook saw £2.2-billion wiped from its value on Thursday as long-term investors in the website seized their first chance to offload shares since its flotation.
The social networking site’s value had already nosedived to barely half what it was when it became a public company in May.
Following the listing, those who invested in the company before the flotation – known to include Goldman Sachs, Microsoft and U2 frontman Bono – had been banned from selling their shares, in a move designed to provide stability in the share price over the first few months.
But on Thursday, this 91-day “lock-up” period ended for one group of early investors, who between them own 271million shares.
Many immediately cashed in on their holdings, which they had seen drop in value by 40 percent in the past three months, flooding the market with tens of millions of shares and pushing the price down by a further six percent.
Facebook floated at $38 (about R300) a share, but Thursday the stock reached a new low of $19.70.
Its shares are yet to close a day’s trading above the level at which they floated, and the website’s founder and chief executive Mark Zuckerberg has seen his personal fortune whittled down from £12.4-billion at the float to £6.5-billion on Thursday night.
Financial analysts predict that even worse is in store for Facebook, with another 1.6 billion shares still to be released over the coming months as a series of “lock-up” periods expire.
The next instalment is on November 14, when a whopping 1.2 billion shares that were given to Facebook staff become sellable.
Unlike financial institutions, which try to release shares into the market in small doses to avoid a run on the stock, staff at Facebook are unlikely to have such qualms about selling all of their shares at once to take whatever profit they can, especially if they fear the price will fall further.
It means Thursday’s stock fall of six percent could be just a foretaste of what is in store.
Earlier this week it was revealed that billionaire investor George Soros pumped £7-million into buying 341,000 shares in Facebook during June.
His investment is often seen by markets as a strong sign of confidence. But even his dollars could not save Facebook’s fall on Thursday. - Daily Mail