Why Facebook Stock Will Continue Its Decline

From this excellent New York Times piece detailing the woes of the Facebook stock, I wanted to highlight these two paragraph:

The next test for the stock could come soon. Over 1.6 billion shares will be eligible to come on the market in several waves, starting on Thursday, when a number of shareholders are allowed to sell. Investors may fear that an influx of shares could cause prices to fall even more.

One former Facebook employee, who did not want to be named because he did not want to damage his relationship with onetime co-workers, said he expected other employees to cash in their stock options as soon as they could, and predicted that the stock’s woes could make it difficult to retain and hire talent. He no longer owns Facebook stock.

My prediction? A lot of insiders are going to unwind Facebook stock, and the effect will be a further decrease in the stock price. I am staying far away. I wouldn’t be surprised if the stock price is trading below $10/share by the beginning of 2013.

2 thoughts on “Why Facebook Stock Will Continue Its Decline

  1. This first wave of share selling is small, but it makes sense for them all to sell due to the larger waves coming up behind which will reduce the worth of their shares.

    • There are about 2.14 billion shares of Facebook stock outstanding. The potential dilution with an extra 1.6 billion shares, even if not all of them will come to market, will be significant (over the long term).

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