(Corrects number of shares sold by chief operating officer to 530,000, not 530 million, third paragraph from bottom)
* Latest in series of Facebook insider lockup expirations
* Cost to short Facebook has dropped sharply
* Shares rise as much as 11 pct
* Zuckerberg not expected to sell until 2013
By Alexei Oreskovic
SAN FRANCISCO, Nov 14 (Reuters) - Shares of Facebook Inc jumped as much as 11.2 percent on Wednesday, even as the biggest block of shares held by insiders became eligible for sale for the first time since the social media company's disappointing debut in May.
Facebook shares were up 8.5 percent at $21.54 in heavy morning trade on the Nasdaq, off an earlier high at $22.09.
"While the lockup is expiring, there is nothing requiring anybody to sell," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York. "Given the low price, these long-term holders are deciding to hold the stock, and that is lifting it here as the fear of the expiration subsides."
Roughly 800 million Facebook shares were eligible for sale on Wednesday after restrictions on insider selling were lifted on the biggest block of shares since the May initial public offering.
The lockup expiration greatly expands the 921 million-share "float" available for trading on the market until now.
Facebook, the world's No. 1 online social network, became the only U.S. company to debut with a market value of more than $100 billion. But its value has dropped nearly 50 percent since the IPO on concerns about money-making prospects over the long term.
Insider trading lockup provisions started to expire in August, and the rolling expirations have added to the pressure on Facebook's stock.
Restrictions on Facebook insiders selling their shares have expired in waves. A restriction on more than 200 million shares expired on Oct. 29.
Pivotal Research Group analyst Brian Wieser said he did not expect Facebook insiders to sell all of their shares as the lockups expired.
"I would expect heavy volumes over the next few weeks, but not undigestible volumes," said Wieser. By his estimate, roughly 486 million of the nearly 800 million newly freed Facebook shares will be sold.
There is some evidence that the heavy interest in "shorting" the stock was dissipating, given the poor performance since it first sold shares in May. Investors who believe a stock will fall can bet against it by shorting the stock, that is, borrowing it and selling it in the hopes it will decline.
According to Markit's Data Explorers, about 28 percent of the shares available for short-selling were being borrowed for that purpose, down from a high of more than 80 percent in early August.
Similarly, SunGard's Astec Analytics, which also tracks interest in shorting, noted that the cost of borrowing Facebook shares is down more than 50 percent since the beginning of the month.
"Everything would seem to indicate the market is losing its appetite to short Facebook," wrote Karl Loomes, market analyst at Astec.
The cost of shorting Facebook has declined to 0.18 percent on an annualized basis, Astec said on Wednesday. By contrast, shortly after the IPO, the cost to short the stock ranged from 40 to 50 percent annually.
"It's become somewhat of a controversial stock - it always adds fuel to the fire if you have a sizable short position," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
"But the unlock is not new news. It doesn't mean everyone is going to sell and it doesn't mean every order is going to come in today."
Several members of Facebook's senior management have sold millions of dollars' worth of shares in recent weeks through pre-arranged stock trading plans as lockup restrictions expired.
Chief Operating Officer Sheryl Sandberg has sold roughly 530,000 shares this month, netting just over $11 million, though she still owns roughly 20 million vested shares in Facebook.
In August, Facebook board member Peter Thiel sold roughly $400 million worth of Facebook stock, the majority of his stake, when an earlier phase of lockup restrictions expired.
Facebook's 28-year-old chief executive, Mark Zuckerberg, has pledged not to sell any shares before September 2013. (Editing by Jeffrey Benkoe and Matthew Lewis)