

Facebook insiders sold 57% of their shares on Friday - huda
http://www.fool.com/investing/general/2012/05/25/ceo-gaffe-of-the-week-facebook-nasdaq-and-morgan-.aspx

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kevinpet
According to the S-1, most executives did not sell anything, only Zuckerberg,
Breyer and Thiel, with most coming from Breyer. VCs and other pre-IPO
investors sold about 10-20% of their shares.

It appears that 57% of the stock offerred in the IPO came from insiders, which
is a very different thing. Pretty shoddy reporting.

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Symmetry
"The underwriters , not Zuckerberg, are in place to judge investors' ability
to absorb shares, yet it appears he was unwilling to listen."

I love how he fails to consider that the underwriters and Facebook might have
different financial interests. The higher the offer price the more money
Facebook makes and the less money the underwriters make.

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drumdance
I thought underwriters take a share of the gross proceeds...?

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smackfu
This is not worthy to be posted here. It's one paragraph in an blog post:

"First, Facebook insiders chose to sell a ridiculous amount of their shares
relative to the last major Internet-related IPO, Google. When Google went
public, insiders dumped 28% of their shares. Facebook insiders, on the other
hand, sold 57% of their shares on Friday."

Comparing two data points isn't exactly rigorous argument. Maybe 28% is low
for Google. What is the average? An actual article on this would be
interesting. A paragraph in some dude's blog? Pointless.

And really, the correct phrasing should be: "57% of the Facebook stock being
offered in the IPO is coming from insiders selling shares."

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va_coder
It's useful to me. The amount of words doesn't equal the quality of the
content.

When my dad asks if he thinks he should buy some Facebook stock, I can tell
him the IPO was more about allowing insiders to sell their stock than raise
capital. Red flag

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ljd
As most of us in the weeks leading to the FB IPO, I was also asked by friends
and family if they should buy stock and the best answer was not to give hard
yes/no's because I simply didn't know how the market will react to something
this unprecedented.

However, coming from a value investment and algorithmic asset valuation
background I explained the problem to them this way:

A Honda Civic is a great car at $20k? Yes.

Is a Honda Civic a good car at $90k? Probably not.

Could you find someone to buy it at that price? Probably.

Should you buy it at that point? That's what buying FB at a $110bn valuation
is.

It's still a great car but I'm not going to buy it for that price.

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snorkel
Smart move. My biggest lesson from the dot.com boom days was sell all vested
options on the first day you are legally allowed to do so.

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ajross
That's one of those micro vs. macro things, though. Individually it's a smart
move. For the company as a whole it's a disaster, and something they should
have planned for. Some of this is obviously because Facebook's IPO is very
late, and lots of employee stock is already vested.

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swah
<http://en.wikipedia.org/wiki/Prisoners_dilemma>

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phillmv
If you don't need a large infusion of capital, this… is the whole point of an
IPO. Who else is going to sell Facebook stock if not "insiders"?

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jpdoctor
> _Who else is going to sell Facebook stock if not "insiders"_

You don't understand the IPO process.

Normally, it is a company with more opportunity than capital. So it creates
additional shares and then sells it during the IPO. This process is just like
raising capital with VCs, except the term sheet is effectively between the new
investors and the company, with the SEC adding all sorts of post-its with
additional conditions.

Only since bubble v1 was it seen as some sort of "achievement" for a company;
An IPO is nothing more than a poor company begging for money and willing to
cause dilution in order to fill its tin cup.

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edj
> _You don't understand the IPO process._

> _Normally, it is a company with more opportunity than capital._

Although this was of course the original rational for IPOs, this looks more
and more like a historical footnote these days. Now that so many IPOs are
late-stage it's hard to see them as anything other than liquidity events for
founders and investors and employees.

~~~
jpdoctor
There are two sides to the IPO: The seller and the buyer. Buyers who see
"liquidity events for founders and investors and employees" as a valid reason
for buying the IPO will continue buying until they don't, just like other
bubbles.

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diego
That number doesn't make any sense. Facebook only sold about 16% of its shares
to the public on Friday. What is the 57% referring to?

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jpdoctor
CORRECTED: Thanks to diego and smackfu below.

Facebook sold X shares for the IPO.

Y shares were created for the sale.

Z shares were sold from the insiders pool.

Obviously: X = Y + Z.

The headline says: Z = 0.57 * X

In old-fashioned days (when companies paid weird things like dividends), it
was seen as profoundly bad for employees to dump this much stock during the
IPO. Usually, employees who think the stock is about to double because of a
revenue/earnings ramp would not be so eager to part with their shares.

~~~
smackfu
Here's another source for the number:
<http://e.businessinsider.com/public/796352>

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diego
Thanks, that's what I thought: 57% _of the stock sold in the IPO_ came from
insiders. That's very different from what the submission title says.

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michaelcampbell
It says "sold 57% of _THEIR_ shares"; I don't understand how one could read it
any other way.

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cube13
The "insiders"(who are these people?) selling off shares isn't that much of an
issue. It's simply good investing.

The IPO was the big chance for people with equity in Facebook to finally cash
out and actually make some money off of the company.

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derwiki
The IPO wasn't the first chance to cash out -- Facebook was being heavily
traded in secondary markets before the IPO (and the lockup preceding the IPO).

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smackfu
The price in the secondary markets seems relevant here. Facebook's valuation
was probably highest at the time of the IPO, and also the secondary markets
are going to have downward price pressure because it's much harder to trade
shares.

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Jabbles
Is any of this actually bad for Facebook? Ok so lots of suddenly-very-rich
people might leave - but as far as the company's concerned the IPO raised an
enormous amount of money. So what if the market's perception of the company
goes down? It's bad for the rest of us (and our pensions), but why should Mark
care about Facebook's stock price?

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ArmstrongRSBC
Responsibility to the shareholders, or is that passe these days?

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Jabbles
But Mark is the majority shareholder...

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traughber
This article is misleading and uninformed.

