小心了: Facebook insider sales are huge red flags ZT# Stock
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Commentary: Think you’re smarter than Peter Thiel or Goldman Sachs?
By John Shinal
SAN FRANCISCO (MarketWatch) — If you had inside knowledge of a hot
investment that you expected to be worth more in six months or even three
months, why would you sell your stake this week?
That’s a question retail investors should be asking themselves now that the
level of stock-dumping among Facebook Inc. FB 0.00% insiders has reached a
level that can only be described as “Grouponesque.” Here’s just how much
certain Facebook insiders are selling.
With the additional sales planned this week, early investors are now selling
more Facebook stock — and pocketing more money from the offering — than
the social network itself.
That’s similar to what happened during several early funding rounds of
Groupon Inc. GRPN -0.73% , whose stock is now trading far below its IPO
price.
Granted, Facebook is much more profitable at this point than Groupon, which
posted a massive net loss in 2011, the same year it went public.
Yet as I pointed out in a column earlier this week, the frenzied demand for
Facebook has driven its share price to a level where the stock is priced to
perfection.
Savvy insiders know when to sell
A large body of research has shown that insiders time their sales of company
stock better than retail investors. That may sound obvious, but it’s worth
repeating this week, given the investing pedigree of those who are selling
Facebook shares.
The list of insiders — including angel investor Peter Thiel, the venture-
capital firm Accel Partners, Goldman Sachs Group Inc. GS -1.14% and Tiger
Global Management — reads like a who’s who list of savvy tech investors.
Angel investor Peter Thiel (left) and Tiger Global’s Charles Coleman are
selling shares.
There was a time when angel investors and VC firms would sell only a small
part of their stakes when start-ups in their portfolios conducted a blowout
IPO. That signaled to the professional money managers buying IPO shares that
they had enough confidence in the company to keep most of their skin in the
game.
But investors in social-media companies have thrown that playbook out the
window, and instead are selling as much as they can, as fast as they can.
Those guys were buying Facebook shares something like two, three or five
years ago. Have you noticed they’re not buying any this week?
Given that they were early in recognizing Facebook’s value, they deserve to
cash in. But do you want to be the one who hands them the cash?
Social-media bubble
Investment bubbles, from Dutch tulips to dot-com properties, don’t pop
until sellers can’t find buyers. Given that Facebook raised both the size
and the price of its offering, insiders who want to sell have found no
shortage of takers.
Click to Play
Pinterest valued at $1.5 billion
Scrapbooking website that has become a Silicon Valley darling because of its
rapid user growth has raised $100 million in a financing round that values
the start-up at $1.5 billion. Spencer Ante reports. (Photo: AFP/Getty Images)
But the decision by so many Facebook insiders to sell so much of their
respective stakes so soon suggests they don’t expect that dynamic to last.
Given the huge valuations being bestowed on young start-ups with no revenue,
such as Instagram (bought by Facebook for $1 billion) and Pinterest,
history says we’re not far from the top of the social-media investment
bubble.
In the spring of 2000, The Wall Street Journal ran a front-page story
describing how an investment club composed mostly of grandmothers in the
Midwest had decided to move their money from conservative investments into
tech stocks, hoping to get a piece of their then-outsize returns.
Within weeks, the Nasdaq Composite Index COMP -2.10% headed south. More
than a decade later, it’s still 40% below those levels.
This week, the Journal had a story about a high-school investing club that
was looking to buy Facebook IPO shares, with some convinced the stock was
guaranteed to make money. To me, these stories sound eerily similar.
That’s not to say the social-media stock bubble can’t get a little bit
larger, nor that those who buy Facebook shares on Friday won’t have the
chance to make a profit. But before you put your hard-earned money into the
IPO, ask yourself whether you can recognize a market top better than the
company’s insiders.
By John Shinal
SAN FRANCISCO (MarketWatch) — If you had inside knowledge of a hot
investment that you expected to be worth more in six months or even three
months, why would you sell your stake this week?
That’s a question retail investors should be asking themselves now that the
level of stock-dumping among Facebook Inc. FB 0.00% insiders has reached a
level that can only be described as “Grouponesque.” Here’s just how much
certain Facebook insiders are selling.
With the additional sales planned this week, early investors are now selling
more Facebook stock — and pocketing more money from the offering — than
the social network itself.
That’s similar to what happened during several early funding rounds of
Groupon Inc. GRPN -0.73% , whose stock is now trading far below its IPO
price.
Granted, Facebook is much more profitable at this point than Groupon, which
posted a massive net loss in 2011, the same year it went public.
Yet as I pointed out in a column earlier this week, the frenzied demand for
Facebook has driven its share price to a level where the stock is priced to
perfection.
Savvy insiders know when to sell
A large body of research has shown that insiders time their sales of company
stock better than retail investors. That may sound obvious, but it’s worth
repeating this week, given the investing pedigree of those who are selling
Facebook shares.
The list of insiders — including angel investor Peter Thiel, the venture-
capital firm Accel Partners, Goldman Sachs Group Inc. GS -1.14% and Tiger
Global Management — reads like a who’s who list of savvy tech investors.
Angel investor Peter Thiel (left) and Tiger Global’s Charles Coleman are
selling shares.
There was a time when angel investors and VC firms would sell only a small
part of their stakes when start-ups in their portfolios conducted a blowout
IPO. That signaled to the professional money managers buying IPO shares that
they had enough confidence in the company to keep most of their skin in the
game.
But investors in social-media companies have thrown that playbook out the
window, and instead are selling as much as they can, as fast as they can.
Those guys were buying Facebook shares something like two, three or five
years ago. Have you noticed they’re not buying any this week?
Given that they were early in recognizing Facebook’s value, they deserve to
cash in. But do you want to be the one who hands them the cash?
Social-media bubble
Investment bubbles, from Dutch tulips to dot-com properties, don’t pop
until sellers can’t find buyers. Given that Facebook raised both the size
and the price of its offering, insiders who want to sell have found no
shortage of takers.
Click to Play
Pinterest valued at $1.5 billion
Scrapbooking website that has become a Silicon Valley darling because of its
rapid user growth has raised $100 million in a financing round that values
the start-up at $1.5 billion. Spencer Ante reports. (Photo: AFP/Getty Images)
But the decision by so many Facebook insiders to sell so much of their
respective stakes so soon suggests they don’t expect that dynamic to last.
Given the huge valuations being bestowed on young start-ups with no revenue,
such as Instagram (bought by Facebook for $1 billion) and Pinterest,
history says we’re not far from the top of the social-media investment
bubble.
In the spring of 2000, The Wall Street Journal ran a front-page story
describing how an investment club composed mostly of grandmothers in the
Midwest had decided to move their money from conservative investments into
tech stocks, hoping to get a piece of their then-outsize returns.
Within weeks, the Nasdaq Composite Index COMP -2.10% headed south. More
than a decade later, it’s still 40% below those levels.
This week, the Journal had a story about a high-school investing club that
was looking to buy Facebook IPO shares, with some convinced the stock was
guaranteed to make money. To me, these stories sound eerily similar.
That’s not to say the social-media stock bubble can’t get a little bit
larger, nor that those who buy Facebook shares on Friday won’t have the
chance to make a profit. But before you put your hard-earned money into the
IPO, ask yourself whether you can recognize a market top better than the
company’s insiders.
