Facebook shares soared 12% on Wednesday as the social network beat expectations following the third stage of its IPO share sale.
Wednesday saw the unlocking of hundreds of millions of shares held by insiders now eligible for sale in the open market.
The move saw the sale of more than 800 million shares, marking the third and biggest wave after the company’s initial public offering in May. The latest lockup expiration is expected to nearly double the size of the company’s share float.
Despite investor’s anticipating a mass sale causing the stock price to plumment, shares rose instead of falling, rising 12% and lifting the stock price to $22.36 (still well below it’s initial price of $38). That somewhat steady price suggests calmer investors are hanging on to the stock to see if Facebook can translate its success on the web into mobile ad revenue.
The move could suggest that the days of uncertainty at Facebook are over, and the social network can anticipate more traditional price changes in the future.
Some analysts had been warning for weeks about the potential impact of the post-lockup wave which could double Facebook’s share float.
Indeed, Facebook’s shares had slipped more than 13% from a post-earnings gain in late October by the beginning of this week — though the stock remained well above the record low of $17.55 seen in early September.
Facebook also has reeled from its controversial IPO in May, which triggered lawsuits from investors who accused the company and its underwriters of misleading them. Another key concern had been the company’s ability to grow its mobile ad business.
Those worries have eased since Facebook’s earnings report last month offered a more upbeat picture of its mobile ad business.
In a Wednesday note, Cantor Fitzgerald analyst Youssef Squali said “patient investors” should “take advantage of the market dislocation that’s likely to ensue between now and year-end to accumulate the stock”
“Facebook is a long-term winner,” Squali wrote, saying the company “is showing accelerating revenue growth and early traction in mobile.”
“You’ve got a perfect storm of things that would drive the stock higher,” he added. “It’s a matter of supply and demand. The supply did not materialize the way people thought it would. And demand is reviving now.”
December 14 marks the last major lockup expiration, with 149 million shares available for trading. The very last expiration will begin on May 18, 2013. With only 47 million shares, it shouldn’t disturb the huge pool of shares available for trading.
