For all the hype leading up to Facebook's Initial Public Offering (IPO) in May of this year, it's somewhat hard to believe the social networking site is performing so poorly in the stock market. It's not shocking that Facebook hasn't lived up to all those inflated valuations that came courtesy of hefty private investments before being traded on the public market, but would you have guessed it would become the second worst performing IPO post share lock-up? Let us explain if you don't know what that means.
Some two billion shares held by early investors and employees are now eligible to be sold, whereas previously they were tied up in a so-called "lock-up" period for 90 days. The idea is to prevent early investors and insiders from dumping stock on the first day.
Now that the lockup period is over, investors can't rid themselves of Facebook shares quick enough, and as a result, the social networking site's stock is tanking. Facebook shares are currently trading for around $19 a pop. It's the first time the company's stock has dropped below $20, which has now lost 50 percent of its value since debuting in May at $38.
According to Bloomberg , only Zynga has performed worse in post lock-up trading, which dropped 7.9 percent on the first day insiders could trade stock.