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Facebook Drops as Employees Sell Shares

Facebook's stock fell on Wednesday after its employees were able to sell shares for the first time.

Tony Avelar | Bloomberg | Getty Images

The lockup period expired on 229 million shares, which caused the stock to drop more than 4 percent earlier in the day, on higher-than-average volume, though it has recovered a bit.

The lockup period officially expired on Monday, but with the markets closed due to Hurricane Sandy, this is the first time employees have been able to sell. (Read More: Facebook Insiders Can Now Shovel Stock Out the Door.)

With Facebook shares off more than 40 percent since its May IPO, Wednesday's losses have likely been moderated by the company's stronger-than-expected earnings last week. The news that the social network is starting to profit from its fast-growing mobile users sent shares flying higher by their biggest one-day jump a week ago. (Read More: Facebook Revenue Jumps 32% Amid Gains in Mobile.)

Facebook's first lockup period expiration was for early investors and directors shares, back in August. Though CEO Mark Zuckerberg said he has no plans to sell his shares, news that angel investor Peter Thiel sold the majority of his shares send the stock over 4 percent lower back in August. And last week Accel Partners Jim Breyer sold a chunk of his shares, worth over $80 million. (Read More: Investor Peter Thiel Sells Facebook Shares.)

The big question is what will happen when the biggest lockup expiration comes on Nov. 14, when nearly 800 million employee shares become available for sale.

Then, a month later, 156 million shares held by early investors and others who participated in the IPO will become available for sale.

In May of 2013, the lockup will expire on 47 million shares held by Russian investors Mail.ru Limited and DST Global Limited and their affiliates.

—By CNBC's Julia Boorstin
@JBoorstin

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.