by Michael Tarsala
Finally some encouraging news for Facebook shareholders?
Netflix CEO and Facebook (FB) board member Reed Hastings just spent $1 million on Facebook shares he purchased in the open market, according to an SEC filing. Hastings paid an average weighted price of $21.03 for the shares – more than 40% less than the $38 IPO price.
Based on the filings, he hadn’t owned Facebook shares previously, other than the 20,000 restricted stock units he received when he joined the company’s board in June 2011.
There are many reasons why an insider might sell stock, but there’s usually only one reason insiders buy: They think the price is headed higher.
One exception, however, could be when a board member seeks to signal a vote of confidence for a struggling stock, to help attract buyers and to help keep it from sliding further.
Yet from that perspective, it’s a positive that Hastings did not hold a lot of Facebook already.
Worries of a continued slide continue for Facebook. As of week’s end, a put at the $15 strike carries among the heaviest volume for any Facebook option strike for December expiration, according to Yahoo Finance data. The trading activity at $15 is one indication that a further slide in coming months is being seen as a potentiality by options market participants.
Continued concerns include:
- Executives leaving the company. Katie Mitic, director of platform marketing and Ethan Beard, director of platform partnerships recently announced they are leaving the company to pursue other interests. Investors may be asking why they are leaving what was thought to be one of Silicon Valley’s premier growth companies so soon.
- Stock lockup expiration. The first wave of insider stock-selling restrictions are lifted on August 16. Additional restrictions will go away in October and November. Investors may be concerned that more Facebook shares coming available to be sold could have the effect of pushing the price down further toward year’s end.
- User numbers quality. Concerns are being expressed about the quality of Facebook’s 955 million active users. The company recently reported in a filing that 8.7% of its active accounts — about 83 million globally – were either duplicate profiles, accounts for people’s business or pets, or otherwise undesirable.
One potential bright spot, however is:
- Facebook’s future mobile ads business. CEO Mark Zuckerberg said in the company’s conference call that its Sponsored Stories placed in its mobile News Feeds are now at a $1 million-a-day run rate. The Sponsored Stories are a way for Facebook to monetize word-of mouth recommendations from individuals that Facebook users know and trust. The advantage of Sponsored Stories is that they are associated with higher click-through rates than other mobile ads. Read: Facebook can charge more for them. Click here to see the Facebook video that explains what it is and how it works.
