“Stay focused and keep shipping” may be the motto Facebook has sought to follow since its flubbed public offering three months ago. But on Tuesday, the company seemed focused mostly on how to stabilise its hemorrhaging stock.
It announced what amounted to a repurchase of several million shares; said its largest shareholder and chief executive, Mark Zuckerberg, would not sell his shares or options for at least another year; and moved up when some employees could start selling their shares.
The moves appeared aimed at instilling confidence into Wall Street, analysts said.
The company’s stock has lost more than half its value from the public offering in mid-May, closing at $17.73 a share Tuesday. But after-hours trading seemed to bring a bit of cheer to the world’s largest social network: The share price rose nearly two per cent.
Still, analysts were sceptical whether these moves, announced in filings with the Securities and Exchange Commission, will have any appreciable bearing on the stock. Facebook employees and early investors will be able to sell hundreds of millions of shares at the end of October, which could reduce prices. The first lock-up, as this is known, will expire on October 29, the company announced, moving up the date slightly. At that point, employees will be allowed to cash in approximately 220 million shares.
Another window will open in mid-November, when employees will be able to cash in approximately 780 million shares, followed by a third in December, and a final one in May 2013.
“While it’s great that Mark isn’t selling, you’re still saddled with significant selling pressure on the stock,” said Richard Greenfield, an analyst with BTIG Research. “The lock-up monkey on their back isn’t going away because Mark isn’t selling.”
Facebook said on Tuesday it would withhold about 101 million shares to cover tax bills. That is not an uncommon move when companies go public. For Facebook, it would have an additional benefit: In effect, it is like a stock buyback, reducing the number of total shares on the public market, “thereby reducing our shares outstanding used to calculate earnings per share,” the filing said.
Early investors have been allowed to sell already, and their exits have vexed many public shareholders. Peter Thiel, one of its first angel backers, has already dumped most of his shares in the company. The venture firm, Accel Partners, has sold millions of its shares.
In the filing, Facebook said its board members Marc Andreessen and Donald Graham also plan to sell shares as soon as they are able to, to pay their tax bills.
In a separate filing late Tuesday, Dustin Moskovitz, one of Facebook’s co-founders, who has since gone on to start his own company, reported that he sold 450,000 shares over the last week.
In its filing, Facebook made clear that Zuckerberg, its co-founder, had no plans to sell his options or shares for the next 12 months.
“I don’t interpret this as an investment thesis change in the stock one way or another,” said a Citibank analyst, Mark Mahaney. “It’s a slightly positive trading piece of news for a stock that hasn’t had any since its IPO.”
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Rick Summer, an analyst with Morningstar, the investment research firm, said Tuesday’s tweaks were “not material to our view of the investment merits of the stock.”
Facebook went public in May at an exceedingly ambitious valuation of more than $100 billion, or $38 a share.
Since then, its sales growth has slowed, and the anticipation of more employee shares flooding the market has helped to reduce its value on Wall Street.
Facebook has sought to portray itself as a company that shrugs off the vicissitudes of the market and remains dedicated to its social mission. Right after the ballyhooed public offering, a poster went up on its campus urging employees to remain hard at work. “Stay focused and keep shipping,” it read.
© 2012 The New York Times News Service
