The first expiring IPO Lock-Up on Facebook (FB) arrives August 15th when trading restrictions are cancelled for company insiders and employees holding large amounts of stock. Many of these shareholders will sell to cash in or diversify on the stock that was awarded to them.
Between August 15th and May 17th 2013 over 2 billion shares will deluge the market. Can the buyers keep up with the sellers? Many investors may wait to buy shares until after the Lock Ups. Other investors may turn to options to reduce their risk such as buying FB calls which gives them the right but not the obligation to purchase shares.
Stocks decline an average of 2 to 3 percent the week that Lock-Ups expire. So how did other high profile companies recently do? Shares of Groupon declined almost 9% when it’s Lock-Up expired June 1st and saw its shares plummet almost 20% that same week. Shares of Zynga lost almost 8% when its lock-up expired May 29th.
So what do you think is in store for FB?