Massive Facebook Lockup Expires, But Shares Still Soar

By Matthew Lynley

Facebook’s stock is soaring today, up more than 9% to about $21.67, even as a massive lockup that allows employees to sell a ton of stock expired this morning.

Given that the market is getting flooded with new shares, it might be expected that Facebook’s stock price would fall sharply. The lockup accounts for more than an extra 700 million Facebook shares are free to hit the market, according to an SEC filing. That compares to about 2.3 billion shares currently in circulation, according to FactSet.

The last time a Facebook lockup expired, shares fell slightly after market open — despite being delayed by mayhem caused by Hurricane Sandy. That doesn’t seem to be the case today.

Here are a few possible explanations, from an earlier story in The WSJ’s MarketBeat blog:

“Everything would seem to indicate the market is losing its appetite to short Facebook,” says Karl Loomes, market analyst at SunGard’s Astec Analytics.

…But with Facebook shares trading around $20 – down nearly 50% from the company’s $38 IPO price in May — short sellers may be thinking the stock doesn’t have much more room left to fall.

Another possibility, according to Loom, is that early investors eligible to unload their stakes may not actually sell.

Indeed, Facebook’s stock is well off its lows of around $18. That has come as a result of diminishing concerns over its efforts to monetize mobile users. One whopping example: Facebook’s News Feed ads are picking up $4 million every day, as of the company’s last earnings call.

The $38 IPO price seems incredibly high in hindsight, but today’s activity does suggest that there’s some confidence — and even a little bit of faith — in Facebook’s future as a business.

Melissa Gilbert Tonya Harding