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As it approaches, the Facebook IPO just got bigger as more early investors look to cash out.
Just after the Facebook IPO price range got a boost, Facebook investors raised the number of shares they are selling in the social network giant's initial public offering. While the company isn't selling any more, individual investors like Accel Partners, Goldman Sachs Group Inc. (NYSE: GS) and others will sell an additional 83.8 million shares.
That brings that total number of shares to be sold to 421.2 million, according to a new regulatory filing, and lifts the sale to as much as $16 billion.
While the news was welcomed by ordinary investors clamoring for shares as Facebook debuts, it's curious why more and more insiders are racing to sell part of their stake. The move may just be a signal of the IPO's astronomical demand – but could make some investors wary.
"If the demand wasn't there, they wouldn't have upsized the deal," Greenwood Capital's Walter Todd told Bloomberg News. "On the other hand, when you see insiders unloading their stakes, you start to wonder why. I could see it turning some institutional investors off."
Facebook IPO Sales
A bonus for insider shareholders willing to cash out ahead of the IPO is they avoid having to hold shares through lock-up periods that could freeze sales for some 91 to 211 days, forcing investors to miss out on probable early gains.
Accel, the biggest seller in the IPO, raised the amount it's selling by 28% to 49 million. Digital Sky Technologies boosted by 74% to 45.7 million. Goldman now plans to sell 28.7 million shares, more than double its earlier amount. Tiger Global Management increased seven-fold the amount first offered to 23.4 million shares.
While Facebook executives and directors have also upped the number of shares they are selling by 62% to 189.4 million, co-founder and top shareholder Mark Zuckerberg did not change the number of shares he's planned to sell.
That's a positive signal to current and potential investors.
As Facebook prepares for the tech world's largest IPO, it has kept the U.S. Securities and Exchange Commission busy with amended filings. Among the most recent, the company increased its price range from $28 – $35 a share to $34 – $38, bringing Facebook's market value to as high as a staggering $104 billion.
IPO Boutique noted Wednesday morning that even with the boosted price range and increased share amount, the offering is "massively oversubscribed." That could fuel gains when Facebook stock starts trading as investors race to get in.
"Everybody is cashing out. It's normal for private equities and venture capitals to cash out, but the obvious question is whether they are stretching it too far," Trung-Tin Nguyen, a hedge fund manager at TTN AG, told Bloomberg News.
At $16 billion, Facebook's entrance as a public company would surpass that of General Motors Co. (NYSE: GM) to be the second-largest in U.S. history, excluding over-allotments, which let underwriters buy more shares at a later date, Bloomberg reported.
Facebook is slated to start trading Friday as Nasdaq: FB.
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