As the expiration date for the ban on sales of insiders’ shares of Facebook Inc (NASDAQ:FB) is nearing, a dilemma looms large on Goldman Sachs Group, Inc. (NYSE:GS) and Microsoft Corporation (NASDAQ:MSFT), whether to sell now and realize a smaller profit, or sit tight and risk further losses. Goldman Sachs Group, Inc. (NYSE:GS) and Microsoft Corporation (NASDAQ:MSFT) hold millions of dollars in Facebook Inc (NASDAQ:FB) shares, with Goldman holding $900 million. According to a regulatory filing, Investors including Goldman, Microsoft, and Accel Partners, which together own more than 200 million shares, can begin selling them on Aug. 16, for the first time since the May 17 initial public offering
“It’s not as if they have to sell all their holdings the moment the market opens,” said Brian Wieser, an analyst at Pivotal Research Group, who rates the stock a buy. “They want to be rational about this.”
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With the end of the lock up period, stock prices are expected to plunge further. Over the next nine months, about 1.91 billion shares will hit the market, compared with fewer than 500 million now available for trading.
Many potential investors are confused whether or not to go for Facebook Inc (NASDAQ:FB) shares, as they are unsure about its prospects. “It’s one of the No. 1 issues on investors’ minds right now,” said Herman Leung, an analyst at Susquehanna International Group, said. “Even the investors that I talk to who want to buy the stock and like the company, are not sure if they can stomach the lockups.”
Google IPO Performance
Google Inc (NASDAQ:GOOG), the most valuable U.S. Internet Company, shares rose by more than 70 percent within two months of its IPO in August 2004, and more than doubled by the end of year. Even Google’s shares declined on the days following expirations in November and December of that year, but shares rose 3 percent on the day the biggest lockup ended. According to a person with knowledge of the matter, Microsoft will hold on to its stake in Facebook, as the company considers FB as a strategic partner in the battle against Google Inc (NASDAQ:GOOG).
The first expiration date for Facebook Inc (NASDAQ:FB) is on Aug. 16, for stockholders other than Chief Executive Officer Mark Zuckerberg, who sold some of their shares in the IPO. Then it will be followed by other dates, in which other shareholders, including employees will be able to sell. The final expiration date is in May 2013.
In its first earning report as a public company, the networking giant reported 32 percent increase in revenue, compared to 45 percent in the previous three months. Since the earnings report, company shares have plunged 19 percent. Facebook Inc (NASDAQ:FB)’s stock price has declined by nearly 40% from its initial public offer price of $38 per share,
Microsoft acquired a stake in FB in 2007 at a $15 billion valuation, which is currently worth $571.9 million. Venture-capital firm Accel Partners, which invested in 2005, their current stake is worth about $2.83 billion. Other major investors include Mail.ru Group Ltd., a Russian Internet company, and Digital Sky Technologies, a Russian investment company. Individuals having major stake include Facebook co-founder Dustin Moskovitz, and Mark Pincus, chief executive officer of Zynga Inc. (NASDAQ:ZNGA).