Facebook shares hit record low as further 271 million released

Shares in Facebook fell sharply to a record low yesterday as a lock-up period that had prevented some shareholders from selling expired.

The stock dropped below $20 to $19.94, down nearly 6 per cent on the day. More than 100 million shares traded in the first three hours, more than double Wednesday’s total volume.

Shares in the social networking site have lost 47.7 per cent in value in the 90 days since its listing and is set to face further pressure as more shares can now be freely sold. Of the 1.9 billion shares that will eventually become available to trade in the market, 271 million were released yesterday – more than half of the 421 million shares sold in Facebook’s IPO.

Scott Kessler, analyst at SP Capital IQ who set a 12-month target price of $25, said: “This is a momentum trade. Investors are not driven by fundamentals [now], but they are driven by emotions.”

He added that this also left the stock “attractive”, although investors are still unconvinced.

Ken Sena, analyst at Evercore Partners, agreed: “We view the next six months as possibly providing a more attractive buying opportunity, given that over one billion new shares are likely to come to market.” – Copyright The Financial Times Limited 2012