Facebook employees poised to cash in
Restrictions on the sale of Facebook stock by the social media firm's employees end this week, meaning many of them will be millionaires, not just millionaires "on paper." But the sale will likely drive the stock price down.
Facebook releases its latest quarterly profit report today — its second since shares of the social network started trading publicly in May. Favorable earnings could give the company’s languishing stock value a much-needed lift; Facebook executives have been scrambling to show Wall Street that they can unlock the profit potential in close to one billion active users.
Already, though, payday is almost here for some Facebook employees. Their compensation in stock has been locked down until now, but in the coming days they’ll get their first chance to cash in. That’s good news for many newly-minted millionaires, but maybe not so much for investors who’ve watched the initial share value shrink by almost half, to around $19.
Wedbush Securities research analyst Michael Pachter says more than 200 million additional shares could flood the market in the coming week, and that is bound to keep prices under pressure.
“A lot of shares are going to get dumped on the market at once,” Pachter explains. “It’s going to take a lot of buyers to absorb that supply.”
At the Motley Fool investment website, Eric Bleeker thinks this could be the last straw for many investors who’ve been waiting for share values to recover.
“Negativity is built into Facebook’s stock right now,” says Bleeker. “There’s a lot of pessimism — these story lines build upon themselves.”
On the other hand, California officials are upbeat. They’re expecting to collect $1 billion dollars in taxes on the windfall. And Pachter, the Wedbush analyst, believes the negative sentiment may be weighing too much on Facebook’s stock value. “I think fundamentally the company is actually worth a lot more” than the current share price suggests, he says.