Zuckerberg's vow to hold shares is meaningless

Unlike most investors, the Facebook boss doesn't need the money.

By Jonathan Berr Sep 5, 2012 10:22AM
Shares of Facebook (FB) rose Wednesday after CEO Mark Zuckerberg and two top investors pledged to retain their shares for a year. Shares have gotten pummeled almost daily since they debuted earlier this year.

Facebook is still a bad bet for most investors, even with this public relations stunt. For one thing, Zuckerberg doesn't need the money. His net worth is about $12.1 billion, even with the 53% decline in the company's stock price. 

Zuckerberg sold a tiny amount of his holdings during the May IPO to raise $1.1 billion to cover his taxes. Wall Street executives would probably give their firstborn for the chance to lend Zuckerberg boatloads of cash based on the value of his holdings. In July, Zuckerberg refinanced the 30-year, $5.95 million mortgage on his home at rate of 1.05%.  That is not a typo.

Facebook directors Marc Andressen and Donald Graham, who pledged to sell Facebook shares only to cover their tax obligations, are in a similar situation. Andreeeson, a co-founder of Netscape, is one of the most successful entrepreneurs in Silicon Valley, thanks to his investments in Twitter, LinkedIn and Skype, among others. Graham's grandfather Eugene Meyer bought the Washington Post (WPO) at a bankruptcy sale in 1933. His net worth is estimated at $500 million.
 
The pop in Facebook's stock won't last. Wall Street analysts are expecting profit and revenue to decline for the next few quarters. The average 52-week price target is $34.50, almost double where it currently trades. Given the huge challenges facing Facebook, that target seems to be wishful thinking.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.

Tags: FBWPO
6Comments
Sep 5, 2012 5:05PM
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I agree with the premise of this article. Short term financial machinations won’t change the value of the stock long term. It just creates more noise in the share price which, ironically, means more unnecessary volatility that devalues the stock even more.

 

From another article I read today:

 

"Facebook Inc promised not to sell stock to cover a nearly $2 billion tax bill and said it will allow employees to cash in their stock weeks ahead of schedule, moving to soothe nervous investors."

 

This sounds more like a move to soothe nervous employees who fear they might not get as filthy rich as they had planned. Watch out investors, here come even more frantic sellers sooner than later. Last time I checked that tends to make prices go down not up. 

 

But, what do I know. I’m just a successful investor who was smart enough not to buy any Facebook stock at $38, $30, $26, $20……….

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Anything out of that man's mouth is a lie.  See the movie!
Sep 14, 2012 1:38PM
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With people now abandoning PC for tablets, giving less scope for advertising revenue, this will eat at the heart of Facebook and other social networking sites which use info about users browsing patterns and give a direct add!.
Sep 5, 2012 6:58PM
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Profit was negative last quarter.  How low do you expect it to go?  All this hype is on unaudited financial data.  The money is going to disappear just a quickly as half of the 900,000 users who have abandoned their accounts.
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