The beaten-down shares of Facebook (Nasdaq: FB) slid over six percent, closing at $19.87 on Thursday, the first day the social network's "lockup" expired for early investors, allowing them to sell their stakes.
Expectations were sky-high that early investors and employees would sell their shares and become millionaires or billionaires. But now that the stock has fallen almost 50 percent below its offer price, disappointed shareholders have been cashing out.
The tech-heavy Nasdaq closed over 1 percent to 3,062.39 while the Dow Jones Industrial Average was up 0.65 percent to 13,250.11
Facebook's stock has been in a near-free fall since employees announced they were leaving the company and institutional funds started selling. Times were rough from the beginning for Facebook since its initial public offering on May 18 when technical glitches on the Nasdaq exchange caused delays in confirming trades. Nasdaq announced in June a $40 million fund to compensate investors "disadvantaged" by the technical problems.
Facebook's IPO was priced at $38 and stock opened in May at $42.05. It closed that day at $38.23 but has since been down 36 days more than it's been up.
Lorraine Monick, managing director at wealth manager Harris myCFO's office in Palo Alto, Calif. said some early institutional investors invested at a very low valuation, so they may still be sitting on a big pile of profit.
Facebook investors were likely prepared for a substantial fall in the stock price, which is common for IPOs before they rise, especially if they worked with a financial advisor.
Thursday's first tier of restrictions on insider sales allows about 271 million shares to be available for trading. In the coming months, another 243 million shares will be available for trading, Reuters reported.
The new shares eligible for trading increases the total available by 60 percent to 1.91 billion.
Facebook has lost about $40 billion in market value since the IPO, and as such is the worst major IPO ever, according to Bloomberg.