Are Bears WRONG About Facebook?
One of Facebook’s (NASDAQ:FB) four co-founders sold off 450,000 shares of the stock over three trading days last week, netting him $9 million.
Though selling only a small share of his $2 billion stake, Dustin Moskovitz’s decision to sell just as the lockup expired is the kind of news that has investors running scared, and has sent shares to new lows over the past week.
Not helping matters, Moskovitz has signaled that he may sell more shares soon — he converted 7 million of his remaining “Class B” shares to “Class A” common stock. Class B shares have 10 times the voting power, but converting them to Class A allows them to be sold publicly.
Of course, even if he sells those 7 million shares, he’ll still own more than 126 million shares of Facebook, worth $2.45 billion at Wednesday’s closing price of $19.44 per share. Moskovitz may simply be in need of some cash — there’s no reason to believe his selling shares is any indication that he’s lost faith in the company. Were that the case, he’d likely be selling more than just 5 percent of his stake.
Furthermore, though Moskovitz’s sale — 150,000 shares a day over the course of three days — came just after the first lockup period expired, he was not subject to the lockup and could have sold at any time since Facebook’s IPO. He may not have chosen the most opportune time to do so, given the stock’s recent performance, but his decision can hardly be seen as him running scared before the stock hits the floor.
Still, Moskovitz’s sale would seem to compound upon that of billionaire investor Peter Thiel, a member of Facebook’s board and the company’s first big investor. He sold nearly 80 percent of his remaining stake just as the first lockup expired. Thiel initially invested $500,000 in Facebook, getting in on the ground floor years ago. His recent share sales have turned that investment into more than $1 billion in cash.
Thiel’s decision to sell a stock that has been so good to him sent waves of panic through an already tense market, leading many to question whether his insider status has given him insight into the company’s future, a future that, given his decision to flee, may look rather bleak.
Of course, it’s important to note that venture capitalists like Thiel usually liquidate their positions when the companies they’ve nurtured since infancy go public.
Facebook shares are plunging today, down nearly 5 percent in early afternoon trading.