Shares of Facebook fell 4.5 percent to a new low after brokerages cut their price targets on the company's shares. They said that the price is only being kept up by lock in rules which prevent people selling their stock as they would like. Early investors got the green light to sell Facebook shares for the first time on August 16, sending its stock down 6.3 percent and prompting price target cuts.
But things will get worse. More than 243 million shares will become available for trading from mid-October, with November 14 being the big day when more than 1.2 billion shares will enter the market. At the moment there are only 628 million shares floating in the market.
BMO Capital Markets analysts said in a note that after all the share lock-ins are removed, then shareholders will start to look at the company numbers. It is only then that they will realise that they paid more than ten times what the company earns and share prices will still further. However it is worth pointing out that they do not believe that the the share price will fall as low as we do. We have been predicting that they will settle at around $13 each every since the IPO.
BofA Merrill Lynch, an underwriter to the IPO, cut its price target by $12 to $23. The shares fell to $18.23 on the Nasdaq on Friday amid heavy trading.