Facebook investors get out early
Some of the company's largest partners are selling some shares. Is it a bad sign?
After seeing so much investor enthusiasm for the IPO, early shareholders like Accel Partners are boosting the amount of shares they're selling. Accel has raised its amount by 28%, and will now offer more than 49 million shares in the IPO.
Facebook is estimating an IPO price of between $34 and $38 a share (the official amount will likely be decided Thursday). At the midpoint of that range, $36 a share, Accel stands to make nearly $1.8 billion.
Accel will still hold 144.4 million Class A shares and nearly 8 million Class B shares after the IPO. So I don't look at this with the same skepticism as The Wall Street Journal, which says that "the smart money is flying out of Facebook as the dumb money piles in."
I think is a natural move for Accel to reduce its risk -- and take home a whopping check in the process. Does the selloff mean Accel thinks Facebook will drop like a stone? Of course not. If Accel really thought that, it would be cashing out a lot more.
Goldman Sachs (GS) is dumping a much bigger stake. Facebook's latest regulatory filing shows that Goldman will sell 28.7 million shares, or about 43% of its holdings.
Venture capitalist Peter Thiel will sell 16.8 million shares, pocketing about $606 million. He's holding on to nearly 19 million Class A shares and 9 million Class B shares.
Facebook's CEO isn't increasing the 6% of his stake he had already planned to sell.
At least one investor said all of this investor dumping could be viewed badly. "When you see insiders unloading their stakes, you start to wonder why," one chief investment officer told Bloomberg. "I could see it turning some institutional investors off."
Facebook and its existing holders have increased the total shares offered in Thursday's IPO to 421.2 million from the previous 337.4 million. The deal's underwriters also have the option to buy as many as 63.2 million more shares after the IPO.
At the high point of Facebook's estimated IPO range, or $38 a share, Facebook would raise slightly more than $16 billion. That would be the second-largest IPO in U.S. history, Bloomberg reports, behind the $17.9 billion raised by Visa (V) in 2008.
Compare this with other tech IPOs, which didn't see nearly the same amount of early selling, writes the Journal's Rolfe Winkler:
Another interesting wrinkle is the comparison with previous tech IPOs. At Groupon, insiders and early investors didn’t sell any of their stake in its IPO. LinkedIn’s IPO similarly saw very little selling. At Zynga, insiders and early investors sold just 7% of their stakes on average.More from Top Stocks
- Will GM hurt Facebook's IPO?
- The corporate tax dodgers hit list
- JC Penney investors may keep feeling the pinch
Everyone is ballyhooing to make this bigger than it really is, they want to bring back the 80's again and wishing it to be through a facebook IPO. I personally think this is goin to be a bust stock because of all the overhyping of FB to begin with. It is a fad to be sure, will it go away I doubt it but it will become more and more useless to the mainstream society, It is certainly not my gig. Once Corporate America decides to block out farmville it will kick it in the shorts but good. It's time to get people back to work and stop dickin around on FB.
When evening news is braggin it up it's surely a setup to let the big cats out of their options for a gain and stiff the public as usual.
Man 2 - I'll give you 100 billion for it.
So I don't look at this with the same skepticism as The Wall Street Journal, which says that "the smart money is flying out of Facebook as the dumb money piles in."
What? You don't look at it that way because "Accel will still hold 144.4 million Class A shares and nearly 8 million Class B shares after the IPO"?
Think they'd not sell more shares if they felt doing so wouldn't set off more alarms?
Facebook is looking to be, in a single issue, a dot-com bust in miniature.
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.