Think the plunge in Facebook’s stock after its sluggish earnings report was bad? Wait until a torrent of new shares hits the market in a few weeks.
Facebook will free up nearly 1.7 billion shares — four times the number now trading — starting next month as provisions that had barred employees from selling their holdings begin to expire.
That could cause the latest migraine for dispirited Facebook investors, who watched in anguish as the stock was bludgeoned after last week’s second-quarter earnings report.
The stock is down 45 percent since Facebook’s initial public offering in May, and does not need an overhang of new supply, experts say. “It’s like a train coming around the corner toward shareholders, so they better get out of the way,” said Francis Gaskins, of research firm IPOdesktop.com.
About 268 million shares will be released in mid-August, an additional 192 million shares in mid-October and the largest slug — more than 1.2 billion shares — in mid-November. Though most of those shares will not be sold, the new supply will dwarf the 421.2 million the company sold in the IPO.
