One of Facebook’s top insiders just dumped shares

by Michael Tarsala

One of Facebook’s earliest and best-known investors just cashed out most of his stake — another potential warning sign for the company’s stock.

Peter Thiel just dumped another 20.1 million of Facebook shares on August 16 and 17, raising $395.8 million, according to an SEC filing. The PayPal founder had already sold $640.1 million during the IPO, bringing his total proceeds to more than $1 billion. He now holds about 5 million shares of the company.

Can you blame Thiel? Facebook (FB) He has been an investor in the company since 2004, and I am sure he was looking forward to his payday.

It would be far worse if Facebook shares temporarily surged in the months following its IPO, and then Thiel sold out, taking advantage of small investors. Unfortunately, he’s down since May, as is pretty much everyone else who invested in the company since that time.

But would he be selling now unless he saw strong potential for an even further slide in the next 6 to 12 months?

The sale was apparently pre-arranged before the IPO. Still, I think it speaks volumes. He just unloaded the vast majority of his stake, and it’s something I don’t think he would have done prior to May if he saw potential for a Google-like IPO rise.

This Facebook IPO was a complete disaster. I have argued already that Facebook itself is a good company. It has some governance issues, but it has strong revenue, real profits, and a growing opportunity in mobile advertising going forward.

It just went public at the wrong time and at the wrong price. The company would have been much better off coming to market at a $20 billion valuation a few years back, when growth rates were still 100% a year.

That would have resulted in a fair entry price at the start, far less hype, and a chance for investors to bid the stock up, instead of short sellers having to knock it down.