Now that Facebook is getting ready to join the Standard & Poor's 500-stock index, the social network has announced that it is selling off millions of its shares. In total, the massive sale of 70 million shares will be used to open up more shares on the new index and it may net Facebook and its executives as much as $3.9 billion.
Facebook will be selling off 27 million of its Class A public shares. The remaining portion of shares will primarily come from Facebook co-founder and CEO Mark Zuckerberg and Silicon Valley investor Marc Andreessen.
A Lot of Money
Now that Facebook will be able to pull in billions from the sale, it will be interesting to see what the social network does with the money. Even though it may have had an unsuccessful IPO, Facebook has been doing relatively well on the stock market and as long as its share value doesn't experience a massive drop before Thursday's closing, Zuckerberg can expect to see nearly $4 billion.
In the spirit of giving (maybe because Christmas is coming up), the network's SEC filing has noted that Zuckerberg will be giving away $1 billion worth of his own personal shares to one lucky individual. Facebook has been quiet regarding what it will do with the billions of dollars brought in from the sale but it did state that the money would be used as working capital.
Even though the sale will lower Zuckerberg's voting rights within the company from 65.2 percent to 62.8 percent, the decrease will not actually affect Zuckerberg's power within Facebook. The Facebook CEO has already let people know that he will likely be using his personal money earned from the sale to pay taxes.
A Bad Sign
While the sale of Class A company shares makes sense as Facebook will need to open up buying capabilities on the new index, the sale of individually owned shares may be seen as a bad sign for the social network.
As some analysts have noted, it is not generally a positive sign for the company as a whole when high-profile individuals are dumping their shares. At the same time, Facebook is lucky since the demand for shares on the S&P will likely counteract the millions that have been sold.
Even if Facebook's bottom line does not immediately change with this sale, morale among investors may be lowered at the sign of Facebook executives getting rid of their own shares as that is generally a sign of trouble in the near future.
The addition of Facebook to the S&P is surely a good thing and it has been viewed as such by many investors, yet the sale seems to have brought on a 4 percent decline in Facebook's share value early Thursday.
Posted: 2013-12-19 @ 12:19pm PT
Smart money goes, not so smart money come. The addition of Facebook to the S&P is definitely no good thing and testimony to the continued decline of the US. Reminds me of this movie: www.imdb.com/title/tt0387808/
Posted: 2013-12-19 @ 11:49am PT
It turns out that Zuck IS smart. He knows that Facebook has already reached its peak and is beginning to decline. People are starting to become aware of the privacy violations by Facebook, Google and others, and are now using privacy-based services like SnapChat, Ravetree, WhatsApp, etc.