Facebook has struggled since its IPO in May, and its uphill battle is far from over.
The company’s shares plunged to all-time lows following the expiration of its stock lock-up period. It seems early investors and insiders are taking the opportunity to exit, with the stock falling 7% to $19.71 in early trading.
If it hits $19, it will have lost half its value since going public.
In all, 271 million shares became eligible for sale today, on top of the 421 million already on the market.
By using an obscure California law, it’s trying to issue stock without registering it first with the Securities and Exchange Commission, in hopes they’ll insulate the deal from investor criticism and save major fees.
A “fairness hearing” will be held before the California Department of Corporations on August 29.
Brian Quinn, a professor of law at Boston College, told Financial Times: “They have other issues with investors, and this move takes all the Instagram issues and puts them in a box. It’s a cleaner process given everything else that is going on.”