Shares of Facebook rallied Wednesday as a new tranche of shares, the largest since the company’s initial public offering, became eligible for trading.
Shares opened at $ 20.08, and by afternoon were up by more than 11 percent, to $ 22.17. The increase was unexpected because a stock’s price generally falls when a glut of shares becomes available. For Facebook, the increase was particularly fortuitous, because the stock is worth just over half of its initial public offering price in May.
About 800 million shares became eligible for trading Wednesday after the expiration of the third and largest stock lockup since the company made its debut on the public market. Some of Facebook’s earliest investors have already sold some of their shares, as have some of the top company executives. It is unclear who among shareholders will sell starting Wednesday and how that might affect stock prices.
Facebook came out on the public market last May with a $ 100 billion valuation, or $ 38 a share, in what was the largest public offering from a technology company. Shares soon plummeted and have hovered in the $ 20 range for weeks.
The stock has received short spikes from time to time, and company executives, including its co-founder and chief executive, Mark Zuckerberg, have appeared in public to reassure investors that they have a blueprint for growth. Its third-quarter earnings demonstrated promising growth in sales, including from advertising on mobiles.
Facebook’s offering was expected not only to spawn new millionaires but also to fill the coffers of its strapped home state of California. The state was expecting to reap nearly $ 2 billion this year in taxes related to the Facebook offering, but that is now likely to be tamped down because the stock has fallen so much. A new estimate is expected Wednesday afternoon.
Some Facebook employees in California may face a higher tax bill for this year than they had originally anticipated because voters last week passed Proposition 30 to raise the tax rate for California’s wealthiest residents. Under the measure, a single taxpayer with an income of over $ 500,000, currently taxed at 9.3 percent, would see his or her rate rise by 2.3 percent. Those who make over $ 1 million will owe an additional 1 percent.
Facebook will, in effect, offset its employees’ tax bills by withholding a portion of their shares. But some employees may have to pay more out of pocket because the tax hike proposition is retroactive: It applies to 2012 income. Passage of the proposition prompted an outburst from Andrew Bosworth, director of engineering at Facebook, on his Facebook page.
“Prop 30 particularly bothers me,” he wrote on the morning after the election. “Higher taxes are totally fair and probably called for in our bankrupt state but retroactive taxes change the contract after the fact and feel very slimy.”
Among Wall Street’s principal concerns about Facebook has been the company’s ability to profit as its users increasingly log in on their mobile phones. A majority of Facebook’s more than one billion users worldwide check their pages on their mobile phones, where the company can serve up only a limited number of advertisements. Facebook has been trying a variety of other measures to make money. It introduced earlier this year a way to buy gifts for friends. It is enabling application developers to advertise and pick up new customers on Facebook. And it has lately been charging brands to make sure their posts show up on their fans’ newsfeeds. In general Facebook’s algorithms decide what kind of content appears on a user’s page.