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Thiel Bails on Facebook
 

Edmundo Braverman's picture
ST
(Human, 14,365
 
Points)
 on 8/21/12 at 9:38am
peter_thiel-home.jpg

It was a race for the exits the other day as the lock-up period for Facebook insiders came to a close, sending the stock below $20 a share and setting new all-time lows. Even Paul Kedrosky expressed surprise at the urgency of the selling pressure, as he had earlier opined that the insiders wouldn't be selling because everyone was expecting them to.

Perhaps the biggest surprise (to me, anyway) is that the godfather of the PayPal mafia himself got almost completely liquid when the lock-up expired. The argument could be made that his investment had run its course, but I can't help thinking that it's more than that. I think the fact that Peter Thiel would sell almost all of his remaining stake in Facebook on the first day he was able to speaks volumes about the tough times ahead for Facebook.

Make no mistake: the investment was a monstrous win for Thiel. He put in $500,000 early on and cashed out close to a billion dollars between the IPO and his recent sales. But if he thought that stake would grow to $2 billion, I'm betting he would've hung in there. The argument could be made that this sale was planned since the stock IPO date (it was), but then what does that say about Facebook?

What do you guys think about all this insider selling in Facebook? It dipped into the 18's yesterday, and it certainly doesn't look very strong here. Are we seeing the next Groupon? Is the bloom off the rose, or is this a temporary blip in the stock price? You think Marky Mark wishes he'd stayed private?

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Comments

Addinator's picture

I think Zuckerberg only ever

ST
 
Points)
 on 8/21/12 at 8:16am

I think Zuckerberg only ever cared about going public to appease the investors and to reward all those people who stuck in their with him, along with himself to a certain extent. Beyond that, I don't think he cares at all about what the 'market' values his company at. I just don't think it is in his personality to care. Besides, you have another lock up expiring shortly and if this keeps up even more people will be running for the exits. So no, I don't think this is over and only a monster earnings report or a major move towards monetizing the user base will really help this stock out. This is a stock that should have been public long before it did and instead of seeing the massive run up in the public markets, it happened on secondary exchanges and between private investors. Now you see the IPO as growth is beginning to turn over. If they buck the downturn this thing will run up again. If not, well, look out below.

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SonnyZH's picture

Addinator: I think Zuckerberg

HF
 
Points)
 on 8/21/12 at 8:39am
Addinator:

I think Zuckerberg only ever cared about going public to appease the investors and to reward all those people who stuck in their with him, along with himself to a certain extent. Beyond that, I don't think he cares at all about what the 'market' values his company at. I just don't think it is in his personality to care.

I don't think he cares about any of the things you mention initially either.

But being honest, I don't think even he is stupid enough not to care about his company's marketcap going down by 50%+ in just 2 months. Afterall, I'm sure he had a big say in FB's valuation should be back in May...

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

West Coast rainmaker's picture

I have never used facebook. I

ER
(Neanderthal, 2,072
 
Points)
 on 8/21/12 at 8:49am

I have never used facebook. I made an account for a week or so ~4 years ago. It just didn't seem that interesting to me. I made another dummy account this week, just to see how the product had evolved: all I can say is feature bloat. This timeline thing, pokes/likes, etc. all just contribute to a cluttered interface. It's not yet myspace, but seems headed in that direction.

What would I want out of a social network platform? LinkedIn, with a chat client. Nothing more. Basically, an online Rolodex with IM functionality. Maybe a calendar and a couple GB of online storage.

I think investors are realizing that (a) Facebook has a ton of data, but can't legally monetize it, and (b) the people using Facebook are the people most desensitized to online ads. What's more, the average FB user is probably 20-22. This is not a demographic with significant purchasing power.

FB has also neglected to build itself out as a development platform. This is why I would say Amazon just *might* warrant its current multiples, while Facebook doesn't even come close. FB is relying on casual games at the moment. They might be addictive, but they are cheap. The development costs are low enough that any reputable game studio could come out with a strong competitor, provided that it could entice people to move.

Addinator's picture

SonnyZH: Addinator: I think

ST
 
Points)
 on 8/21/12 at 8:50am
SonnyZH:
Addinator:

I think Zuckerberg only ever cared about going public to appease the investors and to reward all those people who stuck in their with him, along with himself to a certain extent. Beyond that, I don't think he cares at all about what the 'market' values his company at. I just don't think it is in his personality to care.

I don't think he cares about any of the things you mention initially either.

But being honest, I don't think even he is stupid enough not to care about his company's marketcap going down by 50%+ in just 2 months. Afterall, I'm sure he had a big say in FB's valuation should be back in May...

I don't think it has anything to do with stupidity, it has to do with control. He controls Facebook regardless of what happens to the shareholders. He holds all of the votes that matter, and can overrule anyone. He had a huge say in the valuation and pushed for the maximum possible to reward those shareholders who believed in him and stuck with him throughout. I would bet that this was intended to avoid rewarding the fly by night traders and everyone else in finance looking to make a quick buck when it surged right after the IPO. Instead, he achieved the maximum valuation for his initial investors and shareholders, 10 billion dollars into the coffers of his company AND maintained full control over his company. That's why I say he probably doesn't care that much what the market values his company at today, tomorrow or next month. He is looking for a generational shift in the way people communicate and come together.

The company means more to Zuckerberg than the valuation of the company by others that are on the outside. If it's worth 100 billion today, 10 billion a month from now, and 75 billion a year from now it doesn't make a lick of difference to him. He doesn't need the money to fund operations nor does he need the money personally for his lifestyle. Hell, he isn't even beholden to investors anxious to get out with a profit anymore or the public who owns his company. That's why I don't think it matters to him, I didn't mean to imply he was stupid or otherwise. At least, I didn't think I said that. Haha.

Contact: [email protected]
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wannabeaballer's picture

Their monetization of the

O
 
Points)
 on 8/21/12 at 9:03am

Their monetization of the mobile application is terrible. Every 8 hours or so I get a roll-call about friend X is a fan of Amazon.com, and friend Y loves Nike shoes. This is a turnoff to me, and I find myself using the platform less.

Gun Control Discussion

Unforseen's picture

I think Peter Thiel (and many

(King Kong, 1,099
 
Points)
 on 8/21/12 at 9:04am

I think Peter Thiel (and many of the other insiders) know they will never get the growth they got on FB going forward. He is looking for the next FB, Google, Apple, etc, and wants to make sure he has the cash to instantly invest whenever he finds it.

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wannabeaballer's picture

Addinator: I That's why I say

O
 
Points)
 on 8/21/12 at 9:10am
Addinator:

I That's why I say he probably doesn't care that much what the market values his company at today, tomorrow or next month. He is looking for a generational shift in the way people communicate and come together.

If you go back and listen to interviews with Zuckerberg, and about FB from 2006, you would get a different impression. He actually tried to sell FB to yahoo for a billion.

http://mashable.com/2006/09/21/facebook-to-sell-to...

Gun Control Discussion

CREAM's picture

I agree with West Coast that

(Monkey, 49
 
Points)
 on 8/21/12 at 9:12am

I agree with West Coast that Facebook is becoming too much of a clusterfuck of information. The timeline feature does a horrible job at aggregating information in my opinion, the poke feature is just straight up useless, and the explosion of all these different apps for FB has made some feeds a realm of annoyances (anyone that appears in the newsfeed with an app is an insta delete). Keep shit simple.

I think one of the major issues for FB moving forward is how they will capitalize on users accessing FB through their mobile devices, rather than computers, since a majority of the profits are generated through ads.

Addinator's picture

wannabeaballer: Addinator:

ST
 
Points)
 on 8/21/12 at 9:16am
wannabeaballer:
Addinator:

I That's why I say he probably doesn't care that much what the market values his company at today, tomorrow or next month. He is looking for a generational shift in the way people communicate and come together.

If you go back and listen to interviews with Zuckerberg, and about FB from 2006, you would get a different impression. He actually tried to sell FB to yahoo for a billion.

http://mashable.com/2006/09/21/facebook-to-sell-to-yahoo-for-1-billion/

Thanks for posting that. I'll be honest that I wasn't very attune to Facebook back then, or even the markets for that matter. I'll have to take a look at some interviews.

Contact: [email protected]
See my other blog posts

TheSquale's picture

Addinator: SonnyZH: Addin

AM
 
Points)
 on 8/21/12 at 9:19am
Addinator:
SonnyZH:
Addinator:

I think Zuckerberg only ever cared about going public to appease the investors and to reward all those people who stuck in their with him, along with himself to a certain extent. Beyond that, I don't think he cares at all about what the 'market' values his company at. I just don't think it is in his personality to care.

I don't think he cares about any of the things you mention initially either.

But being honest, I don't think even he is stupid enough not to care about his company's marketcap going down by 50%+ in just 2 months. Afterall, I'm sure he had a big say in FB's valuation should be back in May...

I don't think it has anything to do with stupidity, it has to do with control. He controls Facebook regardless of what happens to the shareholders. He holds all of the votes that matter, and can overrule anyone. He had a huge say in the valuation and pushed for the maximum possible to reward those shareholders who believed in him and stuck with him throughout. I would bet that this was intended to avoid rewarding the fly by night traders and everyone else in finance looking to make a quick buck when it surged right after the IPO. Instead, he achieved the maximum valuation for his initial investors and shareholders, 10 billion dollars into the coffers of his company AND maintained full control over his company. That's why I say he probably doesn't care that much what the market values his company at today, tomorrow or next month. He is looking for a generational shift in the way people communicate and come together.

The company means more to Zuckerberg than the valuation of the company by others that are on the outside. If it's worth 100 billion today, 10 billion a month from now, and 75 billion a year from now it doesn't make a lick of difference to him. He doesn't need the money to fund operations nor does he need the money personally for his lifestyle. Hell, he isn't even beholden to investors anxious to get out with a profit anymore or the public who owns his company. That's why I don't think it matters to him, I didn't mean to imply he was stupid or otherwise. At least, I didn't think I said that. Haha.

I Agree.

That_Aston's picture

Zuckerberg is just an

CF
(Gorilla, 573
 
Points)
 on 8/21/12 at 9:19am

Zuckerberg is just an unlikeable person; He seems like a pretentious douche-bag. Yes I use Facebook but only because so many friends are on it. I have no loyalty to it. The IPO had the company completely overvalued when it doesn't offer anything more than advertizing.

Here to learn and hopefully pass on some knowledge as well. SB if I helped.

andyinsandiego's picture

Edmundo Braverman: Perhaps

CF
(Orangutan, 333
 
Points)
 on 8/21/12 at 11:39am
Edmundo Braverman:

Perhaps the biggest surprise (to me, anyway) is that the godfather of the PayPal mafia himself got almost completely liquid when the lock-up expired. The argument could be made that his investment had run its course, but I can't help thinking that it's more than that. I think the fact that Peter Thiel would sell almost all of his remaining stake in Facebook on the first day he was able to speaks volumes about the tough times ahead for Facebook.

This isn't very surprising to me; he was the seed investor, and his goal was to invest in the company and then get to an exit and sell. He's done that.

Fred Wilson's post today on insider selling among VCs is a good one and well worth reading.

Otter.'s picture

What do you think of Fred

CD
(Gorilla, 554
 
Points)
 on 8/21/12 at 11:45am

What do you think of Fred Wilson's post on this topic? I think he brings up a valid point. It's already been a tremendous gain for people like Thiel - so why not just lock in the performance?

http://www.avc.com/a_vc/2012/08/lockups-and-inside...

"When an investor is looking at a single holding being worth three, five, or possibly ten times their entire fund, you can be sure they are looking to lock in that gain. That's a recipe for fantastic performance and the downside of not locking that in is a lot bigger than the upside of another one or two times their fund size.

And then there's the question of whether venture capital firms are good public market investors and whether they should be managing/holding public stocks. I don't have any hard data here, but my anecdotal data says that we are terrible public market investors. That is why many VC firms have a policy of moving the public stocks out of their portfolios as quickly as they can.

I think that is a good policy. Venture capital is about capturing the value between the startup phase and the public company phase. Others should be focused on capturing the value post the public offering."

Hi, Eric Stratton, rush chairman, damn glad to meet you.

seabird's picture

West Coast rainmaker: Maybe

PE
(King Kong, 1,482
 
Points)
 on 8/21/12 at 11:48am
West Coast rainmaker:

Maybe a calendar and a couple GB of online storage.

Try dropbox.

“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

- Schopenhauer

mhurricane's picture

Were these sales with his

 
Points)
 on 8/21/12 at 11:50am

Were these sales with his personal shares, or the shares of his VC fund? If it was from his VC fund, it makes a lot of sense. He is obligated to return capital to the limited partners of his fund. 500k-1B is not too bad, IMO.

The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.

GoodBread's picture

I'm not sure Thiel made the

AM
(Neanderthal, 3,602
 
Points)
 on 8/21/12 at 12:00pm

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Relentless101's picture

mhurricane: Were these sales

O
(Baboon, 116
 
Points)
 on 8/21/12 at 12:06pm
Sandhurst's picture

I'm not sure I would be so

IB
(King Kong, 1,237
 
Points)
 on 8/21/12 at 12:13pm

"There are three ways to make a living in this business: be first, be smarter, or cheat."

Tolland15's picture

Relentless101: mhurricane:

O
(Baboon, 150
 
Points)
 on 8/21/12 at 12:41pm

I was taught that the human brain was the crowning glory of evolution so far, but I think it's a very poor scheme for survival.

TNA's picture

End of the day Facebook is

O
(Human, 13,509
 
Points)
 on 8/21/12 at 12:55pm

MSF Website
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Heist's picture

From a financial standpoint

(Baboon, 131
 
Points)
 on 8/21/12 at 2:13pm
Edmundo Braverman's picture

Fred Wilson is the TRUTH.

ST
(Human, 14,365
 
Points)
 on 8/21/12 at 2:27pm

CaliBankerSF's picture

All emotions aside, Thiel had

PE
(Baboon, 162
 
Points)
 on 8/21/12 at 2:33pm
West Coast rainmaker's picture

seabird: West Coast

ER
(Neanderthal, 2,072
 
Points)
 on 8/21/12 at 3:11pm
KozzAndEffect's picture

FB was priced at perfection

(Monkey, 30
 
Points)
 on 8/21/12 at 3:28pm
moneymogul's picture

Am I the only one who thinks

IB
 
Points)
 on 8/21/12 at 5:34pm
andres17's picture

Tolland15: Relentless101:

 
Points)
 on 8/21/12 at 6:57pm
GetOnTop's picture

The problem with FB as a

AM
(Baboon, 132
 
Points)
 on 8/22/12 at 12:16am
NewGuy's picture

VCs aren't public markets

HF
 
Points)
 on 8/22/12 at 4:14am

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