More than 270 million shares owned by early investors became available for trade on Thursday after a 3-month curb on sales ended. That's more than half the 421 million shares sold in its initial public offering on May 18.

The company founded by Mark Zuckerberg in his Harvard dorm room became the only U.S. company to debut with a market value of more than $100 billion.

But investors have since grown disillusioned with Facebook's inability to articulate a plan to reverse slowing revenue growth - due in large part to its limited mobile advertising efforts - sending the stock down almost 50 percent from its $38 debut.

Many investors remain unnerved by the massive flood of shares still waiting to be released: More than 1.4 billion additional shares will be eligible for selling by year's end, nearly tripling the amount available for trade.

Analysts say Thursday's frenetic trading offers a taste of what may transpire in November, when many of the social network's employees get to cash in stock awards for the first time.

"An incredible amount, all the shares coming," said Steve Birenberg, president of Northlake Capital Management and portfolio manager for Entermedia Growth Partners, a hedge fund.

"It's important because it adds to the negative sentiment. You've got a big overhang of stock, you've got decelerating growth ..., everything out there now is sort of spun negatively."

With Thursday's selloff, Facebook has lost almost $50 billion, or just under half, of its value since its IPO. The stock, which debuted at $38, fell as much as 7.1 percent to a all-time low of $19.69 before ending the day at $19.87.

Facebook has been wildly volatile, moving more than 3 percent in most sessions. It was the most active counter on the Nasdaq on Thursday with roughly 157 million shares changing hands - five times its 50-day daily average of just under 30 million shares.

Analysts said it wasn't clear whether the selloff was actually driven by insiders or by other shareholders worried about potential insider selling.

Among the largest blocks of shares now available for trading are about 75 million owned by Russia's DST Global Limited and Mail.ru. Other potential sellers may have included venture capital firm Accel Partners and PayPal co-founder Peter Thiel.

"I don't think you're going to see all the supply come to market on Day One. People will wait until they think there will be a little bit of a price lift," said Evercore Partners analyst Ken Sena. "You could say some of the concerns got priced in, and now it's a question how much demand is there to absorb the increased supply."

Facebook's IPO was to have been the culmination of years of breakneck growth that established it as the world's largest Internet social network with a billion users, challenging Google Inc for consumers' time and advertising dollars.

Its May coming-out party is often compared with Google's, which also debuted against a backdrop of intense investor enthusiasm. But the search company founded by Larry Page and Sergey Brin fared better after its IPO, gaining more than 70 percent in its first 60 days on the market.

MORE SHARES COMING

After staging one of the most highly anticipated IPOs in history, Facebook has felt the sting of investor disenchantment.

Concerns about the company's slowing revenue growth, and its ability to make money on mobile advertising, have pressured the stock.

With Facebook trading at just under $20, Zuckerberg, 28, who enjoys majority voting power, has now watched more than $9 billion evaporate from his net worth. Zuckerberg was ranked 35th on the latest Forbes' list of the world's richest billionaires published in September 2011.

"You've had a failed IPO, the stock has been cut in half, a sloppy quarter and a big lock-up expiring. Every one of those tends to erode faith," said Michael Binger, a portfolio manager at Gradient Investments, whose firm does not have a position in Facebook.

With Facebook still trading at 40 times its expected 2012 earnings - compared to 16 for Google and 14 for Apple Inc - Binger said he did not see a buying opportunity until the company's revenue growth starts to re-accelerate.

Another 243 million shares will be released from lock-up between mid-October and mid-November. On November 14, more than 1.2 billion shares will be available for trading. Zuckerberg will not be able to sell his shares until then.

"The biggest issue is not this lock-up; it's the November lock-up," said Pivotal Research Group analyst Brian Wieser.

If the company's perceived operating momentum doesn't improve by then, he said, "then there's real trouble ahead."

GOING SHORT

As the insider lockups started to expire, the number of Facebook shares shorted hit a new high of 92.6 million shares on Thursday, according to Sungard Financial Systems' Astec unit, which tracks short interest. That would represent roughly 13 percent of the company's float of 692 million shares.

Short sellers borrow shares to sell them, betting that they can buy the securities later at a lower price and make a profit.

The cost of shorting Facebook shares has fallen sharply since their debut in May, because the stock is now easily available to borrow. As of Thursday, the cost of borrowing the Facebook shares was about 1.6 percent per annum on an annualized basis, compared to 40-50 percent when the stock made its debut in May.

On Thursday morning, 600,000 shares were shorted, "due in part to the relatively inexpensive rate at which short sellers must pay to sell short," said Tim Smith, executive vice president of Sungard's Astec unit.

"Even though Facebook's market cap has almost been cut in half since its IPO, many investors believe that shares are still overvalued," Smith said.

Short interest has steadily climbed from 25 million shares on May 22, according to the data by Sungard.

"There are still at least 30 million Facebook shares that institutional investors are willing to lend to short sellers as of this morning, so the cost-to-short should not increase in the near-term, however, investors should continue to monitor the cost-to-short going forward," Smith said.

Short interest figures calculated by the Nasdaq Stock Market, released on a lagging basis twice a month, shows 61.3 million shares were shorted as of the end of July. New figures on short interest will not be released until August 24.

"Ultimately, I think the stock is not going to get moving until the advertising growth accelerates again. And I'm not really interested in owning it prior to that point," Birenberg said.

(Additional reporting by Angela Moon and Doris Frankel in New York, editing by Edwin Chan and Richard Chang)

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