“I’d wish you good luck but you wouldn’t know what to do with it if you got it.” – Alec Baldwin in Glengarry Glen Ross
The Wall Street Journal reported this week that Thursday will mark the first expiration of five “lockup periods” allowing private shareholders to sell their Facebook stock. Put in perspective: Facebook initially sold 421 million shares, and Thursday an additional 271 million shares will be eligible for sale. This could increase the outstanding public stock by up to 64% (although it isn’t likely that it will be that high).
million billion dollar question
What is going to happen to Facebook’s stock on Thursday? That is anyone’s guess. It depends upon how confident that any of these investors (among them Microsoft and Goldman Sachs) are about the prospect for Facebook to turn their stock price around.
Also a consideration for investors: the additional four lockups will expire and release up to 2 billion more shares to the public (three at the end of the year and one in May 2013).
Most likely Facebook stock will be diluted and decrease in value. The extent that it will is depends upon how widespread the selling becomes. For most people this is less relevant than a more important question…..
How will the Facebook user experience change?
As mentioned this is the first of five expiring stock lockups, so this should serve to foreshadow the middle three in October, November, and December. If things get bad with the first, one imagines that Facebook will take extraordinary measure to regain investor confidence prior to the end of those expirations.
This may affect the user experience through advertising. Facebook has been aggressive since just prior to their IPO to develop their advertising offerings. Mobile advertising appears to be a very effective product, as have some of their other ad products. Everything from increased targeting, to co-opt of user Timelines has been rolled out in the last few months. Expect that to continue and probably to ramp up further.
The other way that it may materialize is in user sentiment. Users seem to irrationally link their experience on Facebook with its stock performance. So one imagines that there will be more negative discussion, possibly a further degradation of Facebook’s user base – particularly in North America where it appears especially vulnerable.
Good luck, Facebook!
The poor performance of Facebook’s stock is not anything that these executives have dealt with before. Jack Welch in his prime would have been challenged to turn things around in these circumstances – and Facebook has Mark Zuckerberg at the helm.
Expect the stock price to decrease, an increased emphasis on advertising, and many more moans and groans by users about Facebook. In other words, not a lot is going to change.