Aug 16, 2012 05:55 PM EDT
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Facebook Investors Are Ready To Delete Their Profiles As Stock Prices Continue To Plummet

By Donovan Jackson
Facebook not so liked
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There was a lot of hype surrounding Facebook becoming a public company, however for the past month, Facebook has been letting its investors down because of a continuous decrease in the company's stock. This ongoing loss of money is causing investors' money.

 The social networking company's shares dropped below $20 to a new low, extending a slump that has marred the third-biggest US initial public offering and dented retail investor confidence in equity issues.

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The shares suffered after the first expiration of a ban that prohibited pre-IPO investors from trading their holdings, releasing 271 million shares.

Almost 2 billion shares will become eligible for trading over the next 10 months, but analysts expect the most volatility in November, when the largest tranche - held by Facebook employees - will be freed.

"This is still nothing in comparison with November," said Brian Wieser, an analyst at Pivotal Research Group. "How they manage through that is the big deal."

Facebook's stock price fell as much as 7 percent to an all-time low of $19.69, but rebounded slightly to close at $19.87.

It is the worst performer on both the S&P 500 and Nasdaq 100 since its listing on May 17, according to S&P Capital IQ.

Trading volume on Thursday tripled Wednesday's level to 156.7 million shares - an indication that new shares were being sold rather than existing shares traded.

Short interest is at its highest level because of the low cost to short. More than 92 million shares are available for shorting, according to SunGard's Astec Analytics.

Shares in Facebook have been under relentless pressure since listing at $38 and peaking at $45, and the company's first earnings report has done little to assure investors about its growth prospects.

The institutions and individuals who invested in the company early are more likely to have confidence in the company's business fundamentals and long-term growth prospects.

Many will be willing to hold on to their stock even after the ban on selling is lifted. But clients of venture capital firms such as large pension funds may find appeal in selling now.

Those who invested into Facebook when the company first went public had the initial thought that the company would be a cyber cash cow.

If Facebook's stock prices continue to plummet, analyst will be forced to adjust their buying and selling procedures, with the social network.

 

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