SAN FRANCISCO/NEW YORK: Facebook Inc’s shares sank as much as 7.1 percent to a record low Thursday, shedding more than $4 billion of market value after the first of several stock lockups that prevented insider sales came to an end.
Thursday’s drop took Facebook’s total loss since its debut in May at $38 to just under 50 percent, or $40 billion.
The stock tumbled 6.2 percent to $19.90 on Nasdaq. It hit a session low of $19.69.
More than 270 million shares have been unlocked – more than one-half of the 421 million shares sold in the May initial public offering of the social networking company. Roughly 64 million shares of Facebook traded hands in the first hour of trading, more than double its 50-day daily average of just under 30 million shares.
“Pressure will be back on the shares now that liquidity is back in the market,” said Frank Davis, director of sales and trading at LEK Securities in New York. “If [the value of] your holdings has been cut in half, are you going to sit around and risk the rest of that?”
Facebook has been wildly volatile, moving more than 3 percent in most sessions. Facebook, the world’s No. 1 Internet social network with 955 million users, has seen its shares pummeled since the market debut in May that put its value at more than $100 billion.
Concerns about the company’s slowing revenue growth, and its ability to make money on mobile advertising, have pressured the stock.
Analysts said it wasn’t clear whether the selloff in the stock on Thursday was due to insiders selling shares or to other shareholders selling on concerns about the potential impact from insider selling.
Another 243 million shares will be released from lockup between mid-October and mid-November. On Nov. 14, more than 1.2 billion shares will be available for trading. Chief Executive Mark Zuckerberg will not be able to sell his shares until then.
“The biggest issue is not this lockup, it’s the November lockup,” said Pivotal Research Group analyst Brian Wieser.
If the company’s perceived operating momentum doesn’t improve by then, he said, “then there’s real trouble ahead.”
Still, the overall U.S. stock market showed resilience, lifting the global MSCI index by 0.61 percent to 324.70 points, a level last seen on May 4.
World shares rose to near 3-1/2 month highs, following hints that global growth engine China is eyeing new support for its economy, while mildly disappointing U.S. data weakened the dollar.
Investors were heartened by comments from German Chancellor Angela Merkel that appeared to back the European Central bank’s efforts to fight the eurozone crisis.
“The decline in Spanish yields off of that has been a big boon to the market,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
A small unexpected rise in U.S. jobless claims and a surprise drop in housing starts renewed expectations the Federal Reserve would engage in a third round of large-scale bond purchases, dubbed QE3, to help the sluggish economy, spurring a rebound in safe-haven U.S. and German government bonds.
A report from the Philadelphia Federal Reserve also signaled business contraction in the U.S. Mid-Atlantic region in August, though it was milder than in July.
“We are still pricing in QE3,” said Ellis Phifer, senior market analyst at Raymond James in Memphis, Tennessee. “If the numbers are bad, stimulus will be closer.”
Other markets were holding in recent ranges as traders await possible policy action from U.S., European and Chinese central bankers.
“The markets in aggregate are in neutral right now,” said Lawrence Creatura, co-portfolio manager of the Federated Clover Small Value Fund in Rochester, New York.
Oil prices held near three-month highs on worries about possible supply disruption from worsening tension in the Middle East and a sharp drop in U.S. inventories.
Gold prices hovered above $1,600 an ounce on hopes of central bank stimulus, but somewhat encouraging U.S. economic data pared expectations any such moves might happen soon.
On Wall Street, the Standard & Poor’s 500 index managed to hold above 1,400 point mark, close to a four-year high. Analysts said stocks will likely stay around current levels through options expiration Friday.
At midday, the Dow Jones industrial average was up 69.50 points, or 0.53 percent, at 13,234.28. The Standard & Poor’s 500 Index was up 7.96 points, or 0.57 percent, at 1,413.49. The Nasdaq Composite Index was up 24.34 points, or 0.80 percent, at 3,055.27.
Among big movers, Cisco Systems rose nearly 8 percent to $18.70 a share after the world’s largest network equipment market reported better-than-expected results and raised its dividend.
“Cisco shed some light on the future. It shows a bit more optimism,” said Federated’s Creatura.
Developments at several top U.S. companies, however, kept a lid on gains.
Wal-Mart Stores, the world’s No. 1 retailer, said its full-year results may miss Wall Street expectations as growth slows in international markets. Its stock fell 3.3 percent to $71.97.
Top European shares erased early losses, rising 0.24 percent to 1,103.36.
In the currency market, the dollar turned lower against most major currencies after the latest data on U.S. jobless claims and home construction. The dollar index was 0.32 percent lower at 82.37.
The euro stemmed its recent slide against the greenback, rising 0.58 percent to $1.2359.
Hopes of additional ECB interest rate cuts were kept alive by eurozone data confirming that inflation – the ECB’s main focus – remained steady in July. It came two days after reports showed the bloc’s economy sliding back toward recession.
The modest uptick on expectations of further central bank stimulus briefly revived some appetite for bonds, lowering their yields. But demand for Treasuries and Bunds faded as stock markets advanced to session highs.
Benchmark 10-year Treasury notes were down 3/32 in price, yielding 1.8259 percent. The yield touched a three-month high of 1.8572 percent earlier, according to Reuters data.
German Bund futures rose 33 basis points to 141.74 after hitting their lowest level since July 2 earlier.
In commodity trading, Brent crude futures for October delivery were 30 cents higher at $114.61 a barrel, while U.S. oil futures were 95 cents higher at $95.28 a barrel.