Courtesy of Karl Denninger, The Market Ticker
When insiders sell stock, that's usually a strong sell signal for everyone else. As I mentioned in a previous post, many of Facebook's early investors cashed out rather than hang onto their shares, and the stock price plummeted from the IPO price of $38 (at one point the share price had risen to $45) to close at $21.94 on Friday. In after-hours trading, Facebook (ticker symbol FB) traded down another 1.33% to $21.65. Trading was closed Monday and Tuesday due to Hurricane Sandy, but trading reopens today.
After trading hours on Friday, October 26, several senior Facebook officers made required filings of 4s forms to the SEC reporting that on October 25, they converted their newly unlocked restricted shares from Class B common shares, which get ten votes, to Class A common shares which only get one vote. Unlike the Class B shares, the Class A shares can be traded in the public market. In fact, the only reason to give up the ten times voting rich Class B shares for Class A shares is to ready yourself to sell the shares, since Facebook offers no economic value when the exchange is made. In other words, as soon as their shares were unlocked, Facebook's officers got them ready for sale in the open market.
That's not a surprise, right? After all, when the rats start abandoning the ship, one is usually wise to look for the lifeboats and life jackets lest you find the water rising around your ankles.
The bigger problem Facebook has is the intrusion issue. Janet noted something that I've noticed as well on my page in the last couple of weeks — the company has ramped up it's abuse of users in the form of "liking things."
That is, suddenly my top-level page has all sorts of product and service "touts" that I don't think people intentionally posted there. But it sure looks like it from a casual glance. This, incidentally, led me to update my status warning people that I'd be more than happy to prune those who are "friends" and both have and will continue to do so.
The funny thing about this is that FacePalm seems to think that they're the "creator of value" with such stunts. They're wrong. Like so many other allegedly "value-creating" enterprises on The Internet the mistake they make is thinking they can appropriate the actions of their users and sell them on a forward basis without eventually*****ing people off.
That has never proved to work in the history of The Internet and it won't this time either.
I maintain my view that Facebook is ultimately a zero; it's cost of operation will exceed its revenue eventually, and when it does it will simply bleed out until the carcass is washed into the drain of history, much as happend with Myspace.
Disclosure: I own PUTs.
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