Facebook trips Nasdaq short-sale circuit breaker
SAN FRANCISCO (MarketWatch) -- Double-digit percentage drops in
When a stock drops more than 10% from the previous session's closing price, a short-sale circuit breaker is implemented, imposing a restriction on prices at which a stock can be sold short.
"When triggered, it will prevent short selling, including potentially manipulative or abusive short selling, from driving down further the price of a security that has already experienced a significant intraday price decline, and will facilitate the ability of long sellers to sell first upon such a decline," the Securities and Exchange Commission said when it introduced the short-sale circuit breaker in 2010.
Short interest positions on Facebook (FB) are currently at 13.4% and 1% for Starbucks (SBUX) , according to FactSet. A short sale is a bet by an investor that the stock's price will fall.
Most social-media stocks are heavily exposed to short positions, such as
Short positions in
Facebook shares closed down 12% after it reported late Thursday that it swung to a second-quarter loss of $157 million, or 8 cents a share, from a net income of $240 million or 11 cents a share in the same year-earlier quarter. Adjusted earnings came in at $295 million, or 12 cents a share while revenue grew 32% to $1.18 billion. Read more on Facebook's second-quarter loss
Both adjusted earnings and revenue were in line with Wall Street's expectations. Still, investors were nervous that the company did not provide an outlook, according to Colin Sebastian of Robert W. Baird.
In a conference call following the earnings release, Chief Executive Mark Zuckerberg discussed the important role that mobile plays for Facebook, noting that mobile users engage the site more often than via personal computers. "Mobile not only gives us the potential to connect more people with our services, but it also gives us the ability to provide more value and a more deeply engaging experience," he said.
This was the No. 1 social network's first earnings release since going public in May.
Starbucks shares ended 9.4% lower. The coffee retailer said its fiscal third-quarter profit rose 19% to $333.1 million, or 43 cents a share, from $279.1 million or 36 cents a share in the year-earlier quarter. Revenue increased 13% to $3.3 billion.
However, investors were disappointed by Starbucks's outlook, which is depressed by weak demand in Europe and higher commodity prices. The company projected fourth-quarter earnings of 44 cents to 45 cents while analysts are looking for 48 cents a share. See Starbucks comeback hits a snag.
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