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?
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.
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 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.
Try dropbox.
Google Drive, man. Calendar AND storage. If only Google+ wasn't so devoid of life...
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.
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.
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.
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.
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.
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-insider-selling.html
"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."
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.
Exactly. It was just time to realize the return. Pulling all of it is a little puzzling though. If he really believed in the company moving forward, he would have kept some. Maybe half, a quarter. It would have been a lot easier for shareholders to swallow.
He still has ~5.5 million shares of FB, after unloading 20.5M. He already garnered a 1,999% return on his initial investment; at this point, I think he'd just rather have the cash at his disposal, leaving a 'small' chunk in there so Zuck doesn't get offended and lock himself in a room for 3 days playing Warcraft.
I'm not sure Thiel made the right move there. Facebook is probably a safer investment than whatever is left of Clarium.
I'm not sure I would be so dramatic as to say that it's a "race to the exits." Theil has had most his net worth tied up in FB for a while. Regardless of how the stock performed, even if it "popped" post-IPO, he seriously needed to diversify.
End of the day Facebook is just a more slick Myspace. Timeline is annoying. The privacy issues are annoying and the fact that Facebook is basically a huge employment liability is annoying.
Company was perfectly valued and no money was left on the table. Investors who didn't get in at the IPO price were and are idiots. The stock isn't going to get any support until December when it gets incorporated in the various indices and has to be bought by funds and money managers.
Fred Wilson is the TRUTH.
All emotions aside, Thiel had a fiduciary duty to his investors, and the sale of FB stock at current prices still provides a good return relative to his cost basis. If rational valuations have FB at a $14 stock max, I would be trying to lock that in as well.
FB was priced at perfection for the IPO without a monetization strategy or profit plan. Pricing a company like that at 100x earnings is strictly a result of the hype. The price is still too high in my humble opinion, but is settling down around where it should have been in May.
Thiel did the best with what he had. Can't blame him with that return...
Am I the only one who thinks facebook is becoming less popular? Reminds me of back in the day when everyone was leaving myspace for FB. I've seen a trend in my friends spending more time on their twitter accounts and less and less on FB.
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