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August 21, 2012

Facebook's share prices crashing

Facebook Incorporated director Peter Thiel has sold most of his stake in Facebook (the world’s largest social-networking website in case you didn't know that already). Facebook had banned insider sales, but the time restriction for that has ended and Peter decided to sell his $395.8 million in stocks and run with the cash. Overall he has made over $1 billion selling off his shares since Facebook's IPO.

Why? Because Peter Thiel was one of Facebook’s earliest investors and knows when the golden goose is about to die. So why not collect his cash and leave before it becomes "officially dead". Thiel sold about 20.1 million shares in the company on August 16th and August 17th.

He started with an original investment of $500,000 in 2004, so in reality Thiel has made a bundle off being a long time investor in the company. In 8 years he turned that $500,000 into over $1,000,000,000. Not bad for being patient and knowing when to sell at the right time.

Meanwhile other investors in Facebook are now losing their shirts. The stock has lost almost half its value since the IPO amid signs are growing that Facebook’s growth is slowing, leveling out and "profit expectations" are much lower than pundits were claiming. In short the company's value was largely on paper and many insiders are now dumping their stakes.

Facebook last week unlocked 271.1 million shares, the first of five insider-sale restrictions scheduled during the company’s first year as a public company. Another 1.44 billion shares will be freed up through November, but by then prices could be a fraction of what the IPO was.

Right now (as I finish this post) the price is down to $19.48 and dropped 10 cents in the last minute.

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