Facebook float fundamentals

Facebook may keep raising  the IPO bar ever higher but the dominant social network still has some work to do when it comes to convincing the market that it’s no flash in the pan. While investors are clamouring to get a piece of the action, the ones who believed in the company in its early days are about to make a killing.

57 per cent of the Facebook stock being offered in the float is coming from insiders (early investors and employees) selling shares. That’s the reason why Facebook has been able to increase the IPO range by 25 per cent.

According to The Wall Street Journal, Facebook asked the likes of Goldman Sachs, Hedge fund Tiger Global, DST Group and other backers to tip more shares in the float to protect the stock from taking a pummelling once the lock-up period of 180 days is over.

This should be another sign for overenthusiastic punters that the social network is acutely aware that it’s going public at a time when a lot of the easy stuff has already been done. Insider sales aren't uncommon in a public offering as this chart from Business Insider shows the level seen here is unprecedented.

 

 Investors need cool their heels and ponder what’s going to happen once the lock-up period is over. Don’t be surprised if a lot of the old faithful (employees and investors) cash in a few more of their chips, not entirely because they don’t believe in Facebook’s prospects but simply because it’s good business.

However, make no mistake Mark Zuckerberg and his team are going to have every target or risk a market backlash. With that in mind here are a couple of infographics prepared by Reuters which give you the low-down on the biggest thing to hit Wall Street in a long time. 

 

 

 

Related Articles