Shares in the emblematic social network Facebook will fall to $5 a share soon, well below the $38 price set prior to the company’s May initial price offering, libertarian commentator Tom Winnifrith wrote in The Christian Science Monitor.
Monday, the shares slipped 1.3% to end at $19.15 each.
Winnifrith blames the expiration of lock-up periods — which require shareholders to hang on to their stocks for a set period after going public — for the coming plunge.
Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown
Some shares have already been freed up for sale, but more are coming.
“As a reminder, lock-ins of more than 268 million shares expired on Aug. 16. Another 1.7 billion lock-ins will expire by Christmas,” Winnifrith wrote.
“That whole process will increase the number of shares that can be traded by 276 percent by the end of November. Many if not most of the folks holding locked-up shares bought them for as little as 50 cents apiece, so even if they sold at $5 they would be banking gains of 900 percent. Not bad.”
The share price has dropped on investor concerns that despite having 900 million users, monetizing that base will be difficult.
Other experts agree that early investors were eager to sell, pointing out they put their money into the social network a long time ago.
“A lot of people have been waiting,” said Sam Hamadeh, CEO of PrivCo, which researches privately held companies, according to The Associated Press.
“Facebook was expected to go public a long time ago.”
Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown
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