Facebook Falls and the Big Boys Sweat
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It’s official. Facebook (NASDAQ: FB) broke the $20 barrier on Friday and could now be heading for the single digits.
Small investors, having paid dearly for their misguided faith in Wall Street’s Facebook recommendation, can take grim satisfaction in watching the big boys take their financial hits. Fidelity bit the bullet and unloaded nearly 2 million shares on Friday. Oppenheimer Funds, which started Facebook at Outperform earlier this year, sold more than 10,000 shares this past June and also unloaded more shares on Friday.
Other large firms, however, continue to hang on to their Facebook stock. Goldman Sachs (NYSE: GS) announced on July 27th they were maintaining Facebook at ‘Buy’ with a target price of $42, but at the close of trading on August 4th, had lost around $624 million and still hold some 41.6 million shares. Lead underwriter Morgan Stanley (NYSE: MS) likewise holds 11.34 million shares and is looking at a $170.1 million dollar loss since the IPO.
But if you take a look at Pandora Media (NYSE: P) and Zynga (NASDAQ: ZNGA), the worst for all investors is yet to come. Both stocks were highly touted like Facebook and have fallen from opening day highs to make new lows with amazing frequency. Pandora saw its stock price fall from the June 14, 2011 IPO price of $16 to $13.26 on June 16th, a decline of 24% in just two days. A total of 145,043,692 shares out of a total of 161.9 million shares were locked up until the December 12, 2011 expiration date. On that date, the stock price dropped another 5% and at present is currently trading around $10.00 a share.
Online game company Zynga fared even worse after its lockup period expired on May 29, 2012. The IPO stock price was pegged at $11.00, and from the opening trade date on December 11, 2011 until the lockup period ended on May 29, 2012, the stock fell 40%. The price dropped another 7.87% by May 29th, and is currently trading around $3.
Facebook’s first lockup period expires August 15th and at that time another 268 million shares will flood the market. Other lockup expiration periods follow close behind: 247 million shares are released on October 14th, 1.33 billion on November 13th, and another 124 million on December 13th. With Facebook stock already trading at 50% less than its May IPO price, the introduction of almost one billion new shares could drive Facebook’s stock price substantially lower.
Goldman Sachs, Morgan Stanley, and other investment companies are lucky in one respect: They’re large enough to absorb any Facebook stock losses and still remain in business. And while this won’t restore the money lost by small investors, it is somewhat satisfying to see the Wall Street powerhouses caught on the losing end of their own trade recommendation.
kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook. Motley Fool newsletter services recommend Facebook and Goldman Sachs Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.