Facebook set for flood of new shares with lock in period end looming
Washington, June 4 (ANI): Early Facebook investors and insiders will soon be selling more of their stock in the company's Initial Public Offering, according to a report.
Starting in just a few months, they will be free to sell their shares as the so-called lock-up period expires.
According to ABC News, some have expressed fear that the flood of stock available for trading could further inundate investors and water down Facebook's share price, which is already 26 percent below the 38 dollars initial public offering price.
"This is a big issue hanging over the price of the stock," the report quoted Stephen Diamond, professor of law at Santa Clara University, as saying.
"Facebook's stock price still has a way to go on the downside as the market takes account of increased supply," Diamond added.
When an IPO lock-up period expires, more shares are available for trading, placing a greater supply of stock in the stock market.
According to Diamond, large institutions generally factor in lock-ups in the price they're willing to pay for a stock.
"But given that a larger than usual percentage of Facebook shares are held by individuals, who might not have factored in the lock-up expiration, the stock price could face more headwinds," he added. (ANI)
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