Here’s How Facebook Faced Down Its Perfect Storm

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Facebook (NASDAQ:FB) stock went in the opposite direction to expectations on Wednesday despite it being the day of the company’s biggest yet share release. Facebook rallied 12.6 percent to close at $22.36 on Wednesday even as more than 800 million shares became available for selling in what was the third and biggest such release since the company’s initial public offering in May. The stock dropped marginally on Thursday, but according to Wedbush analyst Michael Pachter, demand for the social network’s shares may finally have begun growing.

“Clearly, the lockup expiration is priced in,” Pachter told MarketWatch. “Clearly tons of longs have been waiting for it today. Clearly, the volume isn’t as great as the unlocked shares would suggest. And the shorts were hoping it would go down and they’re covering.”

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The analyst said it was an issue of supply and demand and that investors were finally warming up to Facebook’s growth prospects. “You’ve got a perfect storm of things that would drive the stock higher,” he added. “The supply did not materialize the way people thought it would. And demand is reviving now.”

On Thursday it was revealed that funds led by Tiger Global Management added more than 15 million Facebook shares to their respective portfolios.

Tiger Global, an $8 billion hedge fund, added 9.79 million shares to take its total in the company to 11.75 million shares, Bloomberg said. Jennison Associates added 3.01 million shares, while Clearbridge Advisors bought 2.54 million shares, an increase of more than 400 percent. Vanguard Group added 4.3 million shares, T. Rowe Price Associates (NASDAQ:TROW) added 740,309 shares, and Capital Research Global Investors more than doubled its holding by adding 14.6 million shares.

Facebook has lost more than 40 percent of its value since going public in May, but has been working hard in recent days to ease growth concerns. During the third quarter, the social network reported that sales rose 32 percent to $1.26 billion.

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