The ending of the lockout period for early investors saw an offload of more than 270 million shares on Thursday.
Facebook stock hit an all time low of $19.69, almost half of its initial price when the company debuted on Nasdaq at $38 per share in May 18.
The company’s $16bn IPO made it the largest technology IPO in history with shares initially priced at $38. Yet, sceptics were proven right as Facebook reported disappointing figures in its first earnings report since its IPO, which caused shares to tumble below $24.
The company reported a net loss of $157m in the second quarter compared to a net income of $240m in the same quarter a year ago.
The company’s second quarter loss was largely affected by share based compensation expenses for employees in the wake of its IPO, which totalled $1.3bn.
A large sell off of insider stocks could mean trouble for Facebook whose shares are already receiving doubts from investors about whether the company can quickly monetise its mobile platform.
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More than half of Facebook’s users access the site predominantly through mobile which the company told investors is a weak spot for the social network.
"We do not directly generate any meaningful revenue from mobile, and our ability to do so successfully is unproven," said Facebook in a pre-IPO filing.
The company’s value has now dropped to $40bn, almost 50% less than its market value when it went public on May 18.
Facebook will have to deal with another 247 million shares coming out of lockdown this year in October and another 1.2 billion in November.
Analysts say how Facebook stock continues to perform depends largely on showing investors that it can sell advertising on mobile devices as more its users switch from PC to mobile.
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