Everybody knows that the IPO of Facebook was an absolute catastrophe, but few really understand where the company stands now.
Facebook just reported their first earnings and the stock dropped down to an all time low near $23. Analysts will say it is because they didn’t post any guidance, but I have another opinion. The issue is simple—employees are sitting on millions of dollars in stock and they can’t wait to cash it in.
We’ve seen this very situation many times previously. One example that comes to mind is Google. They reported crushing earnings and projected even better for the next quarter, yet shares of GOOG dropped like a rock and nobody (at first) understood why. In time the market came to recognize the simple fact that too many $20 an hour employees had a ton of money in stock. When their lockup deadline hit, employees were able to dump shares.
Think about it. If you made $50k a year, yet you held $5 million in shares, wouldn’t you do the same thing? I know I would be selling shares off as fast as possible.
Facebook’s situation is much more pronounced than what existed with Google. Here are some numbers to think about: FB has 2.14 billion shares outstanding, yet the float is only 1.14 billion. This means 1 billion shares, nearly half the company, are privately held.
In my opinion employees of FB are going to be coughing up shares for some time to come, until they have no more to sell.
I hope this finds you well.
Karson Keith’s interest in trading started at a very young age. By age 13, he began trading and managing his father’s money. Today, his passion for trading has attracted a following of like-minded income traders seeking his help in taking their trading to the next level.
Karson specializes in cutting-edge options strategies, volatile markets and small trading accounts. He not only has single-handedly grown several small accounts into large portfolio margin accounts within just a few months, but he has also helped countless people achieve the same results.