Business, Economics and Jobs

Investors relieved as Facebook share price rises after lockup ends

Investors breathed a sigh of relief on Wednesday after the price of Facebook shares rose nearly 13 percent, closing at $22.36.

There were concerns that millions of shares would be sold as the company's third lockup ended, depressing the stock price. About 800 million shares of the publicly traded company became available for trading on the NASDAQ Wednesday.

"While the lockup is expiring, there is nothing requiring anybody to sell," said Tim Ghriskey, chief investment officer at Solaris Group told Reuters. "Given the low price, these long-term holders are deciding to hold the stock, and that is lifting it here as the fear of the expiration subsides."

Facebook went public on May 18 and included a "lockup" agreement that requires investors to refrain from selling their shares for a set period of time.

The company has been struggling to keep its share price up since they debuted at $38, reports the Wall Street Journal.

In August, 270 million shares were sold when the company's second lockup expired and Facebook's stock price plummeted by 6 percent.

Shares had been falling steadily until now and the company had lost about half of its value.

But Victor Anthony, an analyst at Topeka Capital Markets told the Wall Street Journal that he has a price target of $34 for Facebook.

He told the newspaper that investors should be taking a second look at buying shares in the company, saying that mobile worries have waned, the balance sheet looks strong and Facebook ad exchange and Instagram are expected to be meaningful financial contributors in 2013.

Facebook reported solid earnings last month that beat expectations. Sales rose 32 percent to $1.26 billion in the period that ended in September. Wednesday's price surge and last month's positive earnings report is likely to ease concerns about Facebook's future.

“There were a lot of institutional investors just waiting to get over this procedural hump,” Brian Wieser, an analyst at Pivotal Research Group., told Businessweek.

“Given that the earnings were good and that there’s better than likely chance of favorable performance in the future, anyone shorting the stock is at much higher risk.”

Two more smaller lockups are also scheduled for the next year. On December 14 about 156 million shares will be released and the one year anniversary of the IPO, May 18, will mark the end of the lockup period with another 47 million shares hitting the market.