Facebook (NASDAQ:FB) issued a whopping 421.2 million shares when the company came public in May. And that number’s about to get bigger.
On Thursday, one of the company’s lock-up provisions will expire, which means that another 271 million shares shares will become available for sale by employees and venture capitalists.
Facebook has had numerous things — like concerns over mobile monetization and pre-IPO overhyping — contribute to the near-halving of its stock since its IPO, but anticipation of the lock-up expiration seems to be weighing on investors, as FB has shed more than 30% in the past month.
A lock-up expiration doesn’t necessarily guarantee there will be lots of selling — after all, many holders might be bullish on the long-term prospects of Facebook and wait things out.
But they often can be dark days for newly public companies. The most recent example is Angie’s List (NASDAQ:ANGI), which has struggled to stay above its first-day price of $16, and sunk 15% Tuesday to below its $13 IPO pricing after a ban on the sale of 25 million of its shares was lifted.
In Facebook’s case, a number of employees likely will be looking to snag some gains, if only to buy a house, a car, or some other big-ticket item. Others might just want to add some diversification to their portfolio.
VCs also might want to book some profits as well. Keep in mind that they often distribute the stock to their limited partners.
There’s also another wrinkle — the capital gains taxation rate could increase next year, so some Facebook holders might just want to play it safe and sell so they don’t miss out on more favorable tax treatment.
That said, if Thursday passes and all is well, Facebook still won’t be out of the woods. In addition to its numerous issues, the company also has other lock-ups expiring in October, November and December — and those total a massive 1.2 billion shares.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.