Seeking Alpha

Are we seeing a repeat of Yelp's lockup expiration? Facebook (FB +9.7%) has shot higher even...

Are we seeing a repeat of Yelp's lockup expiration? Facebook (FB +9.7%) has shot higher even though 773M shares and 31M restricted stock units are eligible for sale for the first time. Short-covering is undoubtedly a factor, but Pivotal Research claims many institutions were waiting for the expiration to arrive to jump in. One potential risk: unlike Yelp, Facebook's expiration isn't centered around just a handful of insiders owning large stakes, but is spread out over many employees and investors.
Comments (24)
  • your Pivital Research link is 404
    and why would Institutions 'jump in' the day of the biggest dilution in FB short history
    makes no sense.
    14 Nov 2012, 11:17 AM Reply Like
  • What are you talking about? It's not a dilution!!! I wanted to buy today, but had other things to do. Still, long with 5k and holding these.
    14 Nov 2012, 02:48 PM Reply Like
  • Good, then those institutions can have fun holding the bag while insiders sell out.
    14 Nov 2012, 11:18 AM Reply Like
  • Very strange!
    14 Nov 2012, 11:20 AM Reply Like
  • This makes no sense at all... but then... Wall Street does not make sense at all! Who would buy shares on this day? The float will nearly double, the company is extremely overpriced, they will loose a lot of money because of the RSUs and all the hype created by the last quarter results are just that: 3 months of information.
    14 Nov 2012, 11:42 AM Reply Like
  • Anyone else thinks the company is behind the pump today (and I don't mean in a kosher way)??
    14 Nov 2012, 01:19 PM Reply Like
  • rep, I too found myself wondering about that possibility. Could it be done? The motive would be to assure their workers got at least a reasonable share of the loot, perhaps, but what would the big banks make of that?
    15 Nov 2012, 08:55 AM Reply Like
  • For $0.95 you can buy the right to sell the stock for $20 until Jan 19th. Those puts look mighty tempting. I don't like to trade but I bought some anyway.
    14 Nov 2012, 01:24 PM Reply Like
  • I just followed your lead a doubled my position and cut my cost basis in half.
    How long can they keep this up ?
    Clowns.
    14 Nov 2012, 02:26 PM Reply Like
  • I just bought January 19's.
    14 Nov 2012, 02:51 PM Reply Like
  • I bought a few puts when it hit 22. Lets see what happens.
    14 Nov 2012, 02:08 PM Reply Like
  • i assume the 4 ipo banks had to backup today. this was a strange move.
    14 Nov 2012, 02:57 PM Reply Like
  • That's the most logical explanation I've read so far...otherwise, can't make any sense of this.
    14 Nov 2012, 06:10 PM Reply Like
  • Options expiration this Friday. With the heavy skew towards puts due to the lockup this week, MM's/banks/whoever will keep the price elevated till a nice number of them expire worthless. Next week will be the real test..
    14 Nov 2012, 04:35 PM Reply Like
  • idkmybffjill, I think you've got it! I hadn't realised the Nov expiration is so close. So it's a two and a half day pump, then; just feasible, I suppose, but that's one hell of a commitment! Conspiracy, anyone?
    15 Nov 2012, 09:03 AM Reply Like
  • I've seen this happen before....Yelp's options expired a little after its share lockup, and shares went up about 25%. It's now back below where it was pre-lockup.
    15 Nov 2012, 09:45 AM Reply Like
  • But there's a lot more money involved this time? Another idea I've read is that big institutions are soaking up the excess today, so they can unload more gradually, at spaced intervals, without provoking a collapse. That at least has a clear mechanism?
    15 Nov 2012, 09:52 AM Reply Like
  • Correct, Yelp was much smaller. I have January 19 puts on FB....a steady decline would help me either way.

     

    Your explanation also seems plausible. No other good reason why of all stocks, FB should have popped yesterday while the overall market tanked.
    15 Nov 2012, 12:30 PM Reply Like
  • If you and gwynfryn are right we should start seeing a steady decline from hereon?

     

    Anyone else agree?

     

    (Today is confirmation of this?)
    15 Nov 2012, 04:52 PM Reply Like
  • Apart from the "from hereon" part; it has to go down some day, but I've given up on trying to predict when. Now that Nov puts are no longer an issue, one would rationaly expect it to start today, but since when did rationality have anything to do with this?

     

    The other scenario is that, as one group sells off, another takes up the slack, and there appears to be an awful lot of the latter, and with money to burn...
    16 Nov 2012, 09:00 AM Reply Like
  • I say, lets wait till Monday and see where it takes us.
    16 Nov 2012, 09:45 AM Reply Like
  • I know everyone speaks of share lockup expiration but has anyone verified that the rise in the stock price is attributed to insiders exercising their options to buy shares? I know everyone keeps talking about shares but I was under the impression that insiders who worked at the company were given options. If that indeed is the case, then I wouldn't be surprised if the rise in the stock price is due to insiders buying shares after exercising their options or due to typical Wall St. manipulation.
    17 Nov 2012, 06:21 AM Reply Like
  • Don't people exercise options so they can then sell the shares, to liberate the money? If they think the price is going up, and they don't need the money, why bother?
    17 Nov 2012, 09:03 AM Reply Like
  • DJShin,

     

    That's not how it works - typically when an option is vested, the holder will exercise (i.e. convert it to a share) only when they want to sell it because otherwise it becomes a liability since it's a taxable event.

     

    Also of note, in the past two occasions of lock-up expiration the stock to a 5-9% hit...(supporting the above).
    17 Nov 2012, 05:29 PM Reply Like
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