Facebook stock lower after lockup expires

• Lockup expiration show how much Facebook workers 'like' the stock
• Employees could unleash some 230 million shares, 11%, of Facebook
• On Nov. 14, lockup expires on another 777 million shares

Facebook shares (FB) fell 66 cents, or 3%, to $21.28 early Wednesday, first day that many current and former employees were able to sell their shares.

The "lockup" expired for 179 million employee Facebook shares Oct. 29. But since stock exchanges were closed Monday and Tuesday due to Hurricane Sandy, Wednesday was the day of the big score for those who decided to sell.

Trading volume was heavy, with more than 37 million shares changing hands in the first 30 minutes of trading, more than half Facebook's average daily volume of 52 million shares. Shortly before noon, volume exceeded 62 million shares.

"You've got people anticipating a significant increase in selling pressure from the shares being unlocked," says Mark Harding, analyst at JMP Securities.

The price didn't fall below $20 a share because of buying by investors encouraged by the company's better-than-expected earnings reported last week, Harding said. Also, the company withheld some shares to pay employee taxes due on the shares, which also reduced selling pressure, he says. "We won't see employees needing to sell in order to cover taxes," he said.

Facebook reported a 32% quarterly revenue gain, to $1.3 billion. Investors were especially encouraged by the fact Facebook got 14% from mobile advertising. Meanwhile, the company earned 12 cents a share excluding one-time charges, topping forecasts by a penny a share.

Wednesday's unlocking is just an opening act. Even more shares, 749 million, will be unlocked Nov. 14.

Since minority shareholders aren't required to disclose their stock sales, it's impossible to determine with certainly how much selling came from employees. But the number of new shares eligible for sale equals roughly 8% of Facebook's 2.2 billion shares outstanding. That's a large chunk of stock that would need to be absorbed by buying demand.

Investors have anticipated this end of the lockup period ever since the No. 1 social networking company went public in May 2012 at $38 a share. The stock price has fallen more than 40% as investors resisted the deal due to its relatively high IPO price compared with other Internet companies and questions about the company's ability to boost revenue from mobile devices.

Previous lockup expirations have been poisonous for the stock. Facebook shares dropped to an all-time low in the days following the first lockup expiration in August when investors and some directors could sell. On Aug. 16, Facebook shares set what was a new low at the time: $19.87 a share in heavy trading. Investors turned even more negative on the stock on news that early Facebook investor Peter Thiel was among investors selling large amounts of the stock.