Facebook Employees Can Sell Stock So Called "Lock-Up" Periods

MENLO PARK, Calif. Facebook's aboriginal investors and a scattering of admiral will become acceptable on Thursday to advertise banal they own in the amusing networking company. It marks the alpha of a accustomed action for accessible companies, one that will accord abounding Facebook advisers the aforementioned appropriate to advertise their shares this fall.

It's believable none of them will sell. But if they do, up to 1.91 billion added shares could flood the banal bazaar over the abutting several months — added than four times the 421 actor shares that accept been
trading back Facebook's antecedent accessible alms in May.

So-called "lock-up" periods, which anticipate assembly from auction shares too abutting to an IPO, about alpha to expire 90 canicule afterwards a banal makes its accessible debut.

Lock-ups are advised to anticipate a banal from experiencing the affectionate of animation that ability action if too abounding shareholders adjudge to advertise a anew traded banal all at once. The accelerating phasing-in of assorted shareholders allows aboriginal owners to allow their banal and accomplish way for new investors, says Peter Zaleski, a assistant of economics at the Villanova School of Business in Pennsylvania.

But there's accident involved, too. If too abounding bodies sell, Facebook Inc.'s banal amount could decline.

That's a botheration the aggregation can't afford. On Tuesday, the banal bankrupt at $20.38, bottomward 46 percent from its antecedent accessible alms amount of $38.

In all, 271 actor shares will become acceptable this week, according to Facebook's authoritative filings. Firms alignment from Accel Partners to Goldman Sachs, Zynga CEO Mark Pincus and Facebook lath associates James Breyer, Peter Thiel and Reid Hoffman are amid those chargeless to advertise banal they own. Microsoft Corp., addition aboriginal Facebook investor, will be acceptable to sell, too.

Facebook's 28-year-old arch executive, Mark Zuckerberg, won't be able to advertise his shares until mid-November. Facebook hasn't explained why Zuckerberg didn't become acceptable this week. He controls about a third of the 1.22 billion shares and banal options that will become apart on Nov. 14.

Wedbush analyst Michael Pachter believes it's absurd that top admiral will advertise their shares as anon as they can. It would attending bad for the company, Pachter says, if Facebook's No. 2 controlling and operating arch Sheryl Sandberg or accounts arch David Ebersman adjudge to sell.

Zynga Inc., the aggregation abaft "FarmVille" and added amateur played abundantly on Facebook, was sued aftermost ages for waiving lock-up restrictions for insiders, including Pincus, afore the company's first-quarter after-effects in April.

"The alone bodies who would advertise are bodies who charge the money," Pachter says. "I would be actual afraid if Sheryl Sandberg or Ebersman sell, but they are not that dumb."

Following this week's lock-up cessation date, about 243 actor added Facebook shares and banal options will access the accessible banal bazaar amid Oct. 15 and Nov. 13. That's back accepted and above Facebook advisers will be able to advertise banal they becoming as compensation.

Then there's the Nov. 14 expiration, and addition a ages later. Abutting May, a year afterwards Facebook's IPO, the Russian Internet aggregation Mail.ru Group and DST Global — both of which fabricated aboriginal investments in Facebook — will be able to advertise their shares.

The aboriginal investors who awash their banal to the accessible as allotment of Facebook's IPO did so at $38 each. If they advertise now, they will accomplish far beneath money from anniversary allotment than they did in the IPO. Facebook's banal has not hit its IPO amount back its aboriginal day of trading. As a result, the company's bazaar amount has plummeted from $104 billion to $59.1 billion in almost three months.

Goldman Sachs and a few added investors are in an abnormal position to accumulation if they advertise Facebook's banal at its accepted price. A January 2011 advance annular from Goldman Sachs and others admired Facebook at $50 billion.

Even afore Facebook's IPO, Silicon Valley merchants — those who advertise absolute estate, cars and added affluence items — had been assured a addition to the bounded abridgement from rank-and-file Facebook advisers who accustomed banal options as allotment of their compensation. Now, experts are admonishing those merchants to atmosphere their expectations.

"In ablaze of the company's bazaar amount actuality bisected of what was expected, and the actuality that the big gainers are not in Silicon Valley year-round, I would not apprehend a new bang in Silicon Valley consistent from this," Zaleski says.

Jon Burgstone, assistant at the Center for Entrepreneurship and Technology at the University of California, Berkeley, credibility out that abounding of Facebook's shareholders had already been able to advertise their banal through clandestine banal markets afore the company's IPO. In abounding ways, he added, "Facebook's IPO was absolutely a accessory accessible offering. A cardinal of ample shareholders and aboriginal advisers accept already been cashing out."

As for blatant cars and adorned clothes?

"People actuality about don't absorb their money on big-ticket clothing, jewelry, etc.," Burgstone says. "The appearance of Silicon Valley charcoal — what accept you done, and what can you do now? — not what characterization are you wearing."

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