This week Facebook faces a fresh challenge as over 1.6 billion shares become eligible to come on the market starting on Thursday. This means that this is the first opportunity that a number of shareholders have had to sell their shares and investors are worried than an influx of shares will cause prices to drop even further.
A former Facebook employee, who has requested to remain anonymous, said that he expects employees to cash in their stock options as soon as possible. Furthermore he thinks that the problems Facebook is having with stock prices could make it difficult for the company to hire and maintain talent.
At the IPO Facebook was valued at over $100 billion primarily as a result of its growth figures. Since it began in 2004 Facebook has attracted millions of users and last year saw revenue grow to $4 billion. Since then Facebook has been working much harder on ways it can make money from user information.
Initially Facebook’s stock dropped rapidly before settling at just under $30 in July. However, in late July it suffered again when Zynga, which makes Facebook’s most popular social games and shares revenue with the company, posted much lower than expected earnings. Immediately after this shares dropped to $21.81.
However, some investors remain optimistic about Facebook. It is profitable and it manages to keep nearly 1 billion users online for longer than any other website. At the moment Facebook is experimenting with ways to increase advertising, its main source of revenue. For example this month Facebook began offering application developers a way to focus ads and it has recently started advertising on its mobile site. Facebook also began looking at a new source of revenue by opening up online gambling applications to its British users.