Shares in social networking giant Facebook have continued to extend their losses since its poorly received initial public offering (IPO) in May 2012. Already down 45% on the listing price, there are fears that the lifting of a lock-in on stock sales by some of its biggest investors could compound the issue.

According to Mark Wilkes, trader at GT247.com, reports have suggested that 268 million shares are due to come off lock-in in the week August 13-17, with additional lock-in expirations (1.6 billion shares) through until December placing additional pressure on the performance of the stock over the next few months. “To date Retail investors who may have piled into the stock since its IPO, expecting it to bottom out quickly, have been left nursing significant losses. However, few realize that they could have made an attractive return on the share price decline through alternative investment instruments, such as CFDs.”

“The pending easing of the selling restriction on early stag investors should play through to the stock price initially. It should be noted that many holders of the stock are committed to the long-term and although smarting from losses may already have positioned themselves for the anticipated down turn. Analysts begin to see value at sub USD19 per share. It is most plausible to expect downside- although long-term investors/peers/institutions/short coverers could begin to seriously accumulate the share below USD15. There are thus opportunities for both short term and longer term considered traders deploying CFD’s.”

A CFD, or Contract for Difference, is an agreement between an authorized, regulated dealer and a trader to settle the difference between the current value of a particular financial instrument and the value of the same share at the end of the contract.

According to Wilkes, an investor using this strategy could still have made a profit even after the shares fell 30% from the listing price of USD38.00 to USD26.88 by June 4. Selling Facebook CFD’s at the lower price and then buying them back at USD20.72 (as of August 7) would have netted the investor a further return of around 23%.

He says in order to ensure that the deal complied with any domestic and offshore FICA FSB/FSA regulations, local investors would have had to have an offshore account open prior to the IPO of Facebook which was funded in foreign currency.

Wilkes says Global Trader is already seeing an interest in this kind of investment strategy amongst local investors. “There is a growing interest in these kinds of trades. However, these do present risks for investors and it is important these are considered carefully on a case-by-case basis. When the risks are indicated and calculated, the client is in a much better position to assess their position and implement their strategy.”

“It’s crucial to make use of reputable trading platforms and to ensure that the investment decision is based on good, professional advice as professional traders will be able to advise on the best risk mitigation tools to employ,” says Wilkes.