Floodgates about to Open for Facebook (FB) Shares?

Ten percent of outstanding Facebook (NASDAQ: FB) shares are eligible to be sold tomorrow. Another 9% will become eligible in a month. By November 13th, more than two-thirds of all outstanding Facebook shares will no longer be tied up.

It’s called lock-up releases. A lock-up agreement binds major investors in a given IPO – company executives, managers and venture capitalists – to that stock for a certain period of time. Lock-up periods generally last roughly four to six months.

Unfortunately for Facebook, the first of those lock-up periods expires tomorrow. Two more expire in the next two months. All told, 1.85 billion Facebook shares will no longer be bound to their original owners come mid-November, according to Business Insider.

Does that mean a mass sell-off of Facebook shares is about to commence? Perhaps. But it seems that the real sell-off began a long time ago.

Facebook shares are worth barely more than half their IPO price these days. The social network’s initial offering opened at $38 a share on May 18 and famously tanked in its first two weeks of public trading.

The shares recovered some of their losses in June and early July, inching their way back up to better than $33 a share at one point.

But they have since fallen back into the abyss, spurred by a disappointing earnings report in late July. The stock is currently going for less than $21 a share despite a 3% push today.

So really, Facebook shares are relatively cheap now. Some big-wig shareholders freed from their lock-up agreements may be inclined to hang onto their shares, convinced the stock can’t sink much lower.

Still, with 2 billion shares becoming eligible for sale in the next two months, there are bound to be plenty of sellers.

That could create an oversupply of Facebook shares in the market, thus watering down the price even further.