A: Want to own Facebook shares? Step right up.
Fans of the No. 1 social-networking site thought the line for Facebook shares would be a long one, yet it turned out to be just the opposite. Shares of the stock have fallen from the initial offering price of $38 a share as investors try to digest the massive supply of stock released in the initial public offering.
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Specifically, Facebook filed to sell 421 million shares of the stock in its IPO. After the deal, the company would have more than 2.1 billion shares outstanding. It's a massive supply of stock for investors to handle, which is a big reason why the stock has had difficulty finding support.
And if the world is already awash with shares of Facebook, the situation is only going to get worse. As is the case with most IPOs, certain insiders and employees who own shares will be allowed to sell those shares in roughly three months. That's when the "lock-up" period expires, according to the IPO regulatory filing. IPOs typically have lock-up periods to protect initial investors from getting hit by an onslaught of additional shares of stock sold by insiders.
The onslaught of Facebook stock looks like an avalanche. At the 91-day point after the IPO, insiders are able to sell 268 million shares of stock. Between 91 and 181 days after the IPO, insiders can sell an additional 137 million shares. And then after 181 days following the IPO, another 1.2 billion shares are free to be sold.
When there's more supply of anything, the price must go
http://www.usatoday.com/money/perfi/columnist/krantz/story/2012-05-25/facebook-insider-lockup-period/55208546/1
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