updated 09:00 pm EST, Wed November 14, 2012
Lack of mass sales spurs Facebook stock recovery
The value of Facebook stock rose close to 13 percent today, as Wall Street expressed relief that the "lockup" on the search engine's shares expiry failed to launch a sell-off. The lockup period ending adds 800 million shares to the pool of 921 million shares available for trading on the market.
"We've seen this before with other lockups. People sell them leading up to the lockup period expiring, and then they have a bit of a relief rally," said Ryan Jacob, chief executive of the Jacob Funds.
"While the lockup is expiring, there is nothing requiring anybody to sell," added Tim Ghriskey, chief investment officer at the Solaris Group. "Given the low price, these long-term holders are deciding to hold the stock, and that is lifting it here as the fear of the expiration subsides."
Companies generally impose "lockup" status on insider shares for three months to a year after an IPO to regulate the release of shares on the free market to prevent a depression of the sale price from mass selloffs. Post lockup, Facebook stock boasted trading volume more than four times greater than its average, and finished up 12.6 percent at $22.36. Analysts expect heavy trading volumes over the next few weeks, but little depression in the stock price.