Courtesy of John Carney/CNBC
MarketsMuse Editor Note: article below was published Tuesday Nov 13 at 6pm, in advance of $FB lock-up expiration.
Eight hundred million shares of Facebookare set to “flood” the market Wednesday, as the company’s biggest post-IPO lockup expires.
This has many investors fearful that stock sales from employees could push the stock, which has lost nearly half its value since the IPO, even lower. Some are calling it the “Facebook fiscal cliff.” (Read more: Facebook Drops as Employees Sell Shares)
But not everyone sees this as a reason to sell. In fact, some contrarians think it will be an excellent time to buy Facebook.
Matt Gohd, a senior managing director and options strategist at WallachBeth Capital, thinks Facebook [FB 21.5592 1.6992 (+8.56%) ] stock could very likely go up in the aftermath of the lockup expiration.
“I think it could go up tomorrow, it will be up next week, and it will be up at the end of the month,” Gohd said.
Gohd’s thesis is pure contrarianism. With so many traders positioning themselves for a downward move in Facebook stock, the stock price may have already incorporated the coming sales. If you believe markets are at all efficient, certainly they should have priced in the shares coming out of lockup.
“The end of the lockup is the worst-kept surprise in U.S. history,” Gohd says.
When the first lockup of Facebook shares was lifted on August 16, shares fell 6.3 percent. But if you bought shares at the closing price on August 16 and held them for a month, you saw an 8.3 percent gain.
I should point out that Gohd pointed out in early August that the lockup expiration could be bullish for the stock
Facebook shares were flat the first trading day following the lockup expiration on October 15. If you bought at the closing price that day, you’ve seen a 2.18 percent gain to date. (And you were up by a nudge more than 19 percent on October 24.) Continue reading