Market Overview

Will Facebook Investors Sell Their Shares or Post a Positive Status Update?

Will Facebook Investors Sell Their Shares or Post a Positive Status Update?

Facebook (NASDAQ: FB) is bracing itself for a sell-off Wednesday when another share lockup expires. Is this the end of the social network or merely another speed bump for the Mark Zuckerberg enterprise?

The answer depends on who you ask.

Brian Wieser, an analyst with Pivotal Research Group, told the Financial Post that the expiration could lead to a "near-doubling of the float of freely trading shares."

"We believe only a portion of newly free shares will be sold in the near-term," he added.

But a "portion" could still amount to a significant loss. When the last lockup expired, Facebook dropped five percent. Shares are trading down less than one percent this afternoon as investors prepare for the worst.

Facebook currently trades near $20. If the stock declines five percent tomorrow, the social network stock will drop to $19.

While some investors may scoff at the decline, there is the chance that Facebook could experience a more significant selloff. Nearly 800 million shares will be available for trading this Wednesday -- more than any other period in the company's public history.

This day has terrified numerous investors. They cannot decide if they should sell or hold on to the stock for a little longer. After all, Facebook is now the proud social network with one billion members worldwide. If Facebook ever figures out how to properly monetize each of those users, the company could become one of the most profitable enterprises in the world.

Current shareholders would hate to miss out on that. But they may be too scared to hold on to their investment. (This is why experts say that investors should not let their emotions control or influence their decisions.)

Whatever happens, Wieser is not too worried. "To the extent volumes do turn out to be heavy, downward pressure on the stock should be limited," he said, adding that "demand from institutional investors is likely to emerge if selling proved heavy at depressed prices." He believes that eager investors are "likely" to hold off until the stock trades at a more reasonable price.

"If significant selling did occur, institutional investors who have otherwise been sitting on the sidelines would initiate positions," he concluded.

On October 23, shares of Facebook rose significantly after the company reported its third-quarter results. The company continued to rise the next day, gaining 20 percent.

Wedbush Securities (which maintained its Buy rating and $35 PT) was among the firms to praise Facebook's results. Stifel Nicolaus upgraded the stock from Hold to Buy, while Jefferies raised its PT from $30 to $32.

Investors will be watching closely to see who made the right call tomorrow.

Follow me @LouisBedigianBZ

Posted-In: Brian Wieser Facebook Pivotal Research GroupAnalyst Ratings Tech Best of Benzinga


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