* Facebook has shed $40 billion of value in rocky post-IPO
ride
* Shares dive as first lockup expires, but the bigger
tranche due November
* Disillusioned investors see little reason to buy, eye next
results
(Adds hedge fund's comments, market and trading details, links)
By Alexei Oreskovic and Ryan Vlastelica
SAN FRANCISCO/NEW YORK, Aug 16 (Reuters) - Facebook Inc
shares sank 6.3 percent to a record closing low after
early investors got the greenlight to sell for the first time
since the No. 1 social network went public, starting a string of
insider lockup expirations that will pressure the stock for
months.
More than 270 million shares owned by early investors became
available for trade on Thursday after a 3-month curb on sales
ended. That's more than half the 421 million shares sold in its
initial public offering on May 18.
The company founded by Mark Zuckerberg in his Harvard dorm
room became the only U.S. company to debut with a market value
of more than $100 billion.
But investors have since grown disillusioned with Facebook's
inability to articulate a plan to reverse slowing revenue growth
- due in large part to its limited mobile advertising efforts -
sending the stock down almost 50 percent from its $38 debut.
Many investors remain unnerved by the massive flood of
shares still waiting to be released: More than 1.4 billion
additional shares will be eligible for selling by year's end,
nearly tripling the amount available for trade.
Analysts say Thursday's frenetic trading offers a taste of
what may transpire in November, when many of the social
network's employees get to cash in stock awards for the first
time.
"An incredible amount, all the shares coming," said Steve
Birenberg, president of Northlake Capital Management and
portfolio manager for Entermedia Growth Partners, a hedge fund.
"It's important because it adds to the negative sentiment.
You've got a big overhang of stock, you've got decelerating
growth ..., everything out there now is sort of spun
negatively."
With Thursday's selloff, Facebook has lost almost $50
billion, or just under half, of its value since its IPO. The
stock, which debuted at $38, fell as much as 7.1 percent to a
all-time low of $19.69 before ending the day at $19.87.
Facebook has been wildly volatile, moving more than 3
percent in most sessions. It was the most active counter on the
Nasdaq on Thursday with roughly 157 million shares changing
hands - five times its 50-day daily average of just under 30
million shares.
Analysts said it wasn't clear whether the selloff was
actually driven by insiders or by other shareholders worried
about potential insider selling.
Among the largest blocks of shares now available for trading
are about 75 million owned by Russia's DST Global Limited and
Mail.ru. Other potential sellers may have included venture
capital firm Accel Partners and PayPal co-founder Peter Thiel.
"I don't think you're going to see all the supply come to
market on Day One. People will wait until they think there will
be a little bit of a price lift," said Evercore Partners analyst
Ken Sena. "You could say some of the concerns got priced in, and
now it's a question how much demand is there to absorb the
increased supply."
Facebook's IPO was to have been the culmination of years of
breakneck growth that established it as the world's largest
Internet social network with a billion users, challenging Google
Inc for consumers' time and advertising dollars.
Its May coming-out party is often compared with Google's,
which also debuted against a backdrop of intense investor
enthusiasm. But the search company founded by Larry Page and
Sergey Brin fared better after its IPO, gaining more than 70
percent in its first 60 days on the market.
MORE SHARES COMING
After staging one of the most highly anticipated IPOs in
history, Facebook has felt the sting of investor disenchantment.
Concerns about the company's slowing revenue growth, and its
ability to make money on mobile advertising, have pressured the
stock.
With Facebook trading at just under $20, Zuckerberg, 28, who
enjoys majority voting power, has now watched more than $9
billion evaporate from his net worth. Zuckerberg was ranked 35th
on the latest Forbes' list of the world's richest billionaires
published in September 2011.
"You've had a failed IPO, the stock has been cut in half, a
sloppy quarter and a big lock-up expiring. Every one of those
tends to erode faith," said Michael Binger, a portfolio manager
at Gradient Investments, whose firm does not have a position in
Facebook.
With Facebook still trading at 40 times its expected 2012
earnings - compared to 16 for Google and 14 for Apple Inc
- Binger said he did not see a buying opportunity until
the company's revenue growth starts to re-accelerate.
Another 243 million shares will be released from lock-up
between mid-October and mid-November. On Nov. 14, more than 1.2
billion shares will be available for trading. Zuckerberg will
not be able to sell his shares until then.
"The biggest issue is not this lock-up; it's the November
lock-up," said Pivotal Research Group analyst Brian Wieser.
If the company's perceived operating momentum doesn't
improve by then, he said, "then there's real trouble ahead."
GOING SHORT
As the insider lockups started to expire, the number of
Facebook shares shorted hit a new high of 92.6 million shares on
Thursday, according to Sungard Financial Systems' Astec unit,
which tracks short interest. That would represent roughly 13
percent of the company's float of 692 million shares.
Short sellers borrow shares to sell them, betting that they
can buy the securities later at a lower price and make a profit.
The cost of shorting Facebook shares has fallen sharply
since their debut in May, because the stock is now easily
available to borrow. As of Thursday, the cost of borrowing the
Facebook shares was about 1.6 percent per annum on an annualized
basis, compared to 40-50 percent when the stock made its debut
in May.
On Thursday morning, 600,000 shares were shorted, "due in
part to the relatively inexpensive rate at which short sellers
must pay to sell short," said Tim Smith, executive vice
president of Sungard's Astec unit.
"Even though Facebook's market cap has almost been cut in
half since its IPO, many investors believe that shares are still
overvalued," Smith said.
Short interest has steadily climbed from 25 million shares
on May 22, according to the data by Sungard.
"There are still at least 30 million Facebook shares that
institutional investors are willing to lend to short sellers as
of this morning, so the cost-to-short should not increase in the
near-term, however, investors should continue to monitor the
cost-to-short going forward," Smith said.
Short interest figures calculated by the Nasdaq Stock
Market, released on a lagging basis twice a month, shows 61.3
million shares were shorted as of the end of July. New figures
on short interest will not be released until August 24.
"Ultimately, I think the stock is not going to get moving
until the advertising growth accelerates again. And I'm not
really interested in owning it prior to that point," Birenberg
said.
(Additional reporting by Angela Moon and Doris Frankel in New
York, editing by Edwin Chan and Richard Chang)