Facebook to Release More Shares, Concerns among Investors

Facebook is looking to free more number of shares for the potential investors soon and this probably will mark the biggest increase since the company decided to go public on last May. The investors in Facebook shares are already quite concerned about the growth prospects of the company and such news now may not sound good to them. Reportedly, the regulatory filing has already been completed. According to the regulatory filling, around 804 million shares which were held by the former employees of the company or were sold during the initial public offering will be available now. Incidentally, first in August and then in October, Facebook released some of its shares as well; however, those releases were not as big as the current one.

The operator of the largest social networking site in the world, based in Menlo Park, California, Facebook released its shares publicly in May, 2012. Since then, the share prices have dropped to half of its original value. Investors are pretty much concerned due to the increase in number of shares and some are even unsure about the ability of Facebook to boost its mobile-advertising sales.

The lockup expiration however doesn’t end here as it will be followed by two more rounds. So far, the entire release process is expected to be finished by May, 2013. In the next round, Facebook will free up another 156 million of shares. This will not include shares of Mark Zuckerberg, the Chief Executive Officer of Facebook. Zuckerberg has already confirmed that he doesn’t intend to sell his shares before September, 2013. On 18th May, 2013, next round of freeing shares will happen. On that day, the 47.3 million shares owned by DST Global Ltd. of Russia will be released.

According to Scott Kessler, an analyst at S&P Capital IQ, this share release will definitely be important for the investors and they have been thinking about the same for quite some time.

Ashley Zandy, who works as a spokesperson for Facebook was asked about this move of the company, but, she declined to air any comment right now.

An analyst of Pivotal Research Group, Brian Wieser, however had a different take on this matter. According to him, this new lockup expiration may have limited downside only. Brian also mentioned that as the stock prices have declined for Facebook recently, pretty less are the chances that many investors will sell their shares right now. He acknowledged that the number of shares released is huge, but, he is affirmative that the market will still be able to handle the trading which will generate due to the lock-up expirations.

In the 3rd quarter of this year, Facebook has been able to rise its sales by 32% (Most of its earnings come from advertising). This is kind of at par with growth shown by the company in 2nd quarter of 2012. However, if compared to the 4th quarter of 2011 (55%) or 1st quarter of 2012 (45%), it is clear that Facebook’s growth has slowed down.

However, everything is not going bad for the company. The early estimates for 3rd quarter profit were of $1.23 billion. But, the company surpassed the estimates, thanks to its new efforts of selling advertising on mobile devices. According to Colin Sebastian, who works as an analyst for Robert W. Baird & Co., this new advertisement service of Facebook is showing promises, contrary to beliefs of many investors. He also stated that the investors should plan on long term basis, rather than focusing on short term goals. According to him, over the time, Facebook will definitely become a legitimate advertisement platform and then it will easily earn the confidence of investors.