Facebook Selloffs Dealing Blow to California
Sometimes the angel investor doesn’t remain such an angel. San Franciscan Peter Thiel, alongside many other California residing insiders, sold stock in Facebook after a lockup expired last week. Due to its Facebook Assumption in the state budget, California is now losing nearly $1 billion in expected revenue as California residents of the Facebook elite selloff well below the IPO price.
Monday’s regulatory filing indicated that the former Paypal CEO Thiel sold 20 million shares of Facebook. The shares were sold on Thursday and Friday for between $19.27 and $20.69. He grossed $396 million.
Thiel was one of Facebook’s initial investors, having invested $500,000 in the company in 2005. So clearly, he did all right in the deal, grossing more than $1bn from his Facebook venture. Other early investor, the Palo Alto, California based Accel Partners distributed stock to limited partners, many of whom sold based on Facebook’s performance.
And yesterday, Facebook co-founder Dustin Moskovitz, presumed Californian, got out of 450,000 shares of Facebook in the past few days for proceeds of about $9 million. Though this is only a small share of his overall holdings in the company, he reserved the right in his filing to sell 7 million more shares by having converted them from Class B to Class A.
All Californians. Having sold their shares well below $35, Thiel, Accel and Moskowitz have cost California nearly $1 billion in the state’s expected revenue. Why? Because, although it’s already borrowing money from Wall Street, California admitted last month that the company’s stock price has “fallen far below” $35 per share, the gross error Facebook Assumption in the state’s revenue projections. California expected to gain from the income tax on Facebook shares, but assumed big California residents tied to the stock would sell at $35. Instead, they are selling at between $18-$20.
More pressure will be put on the Facebook stock as 1.66 billion locked-up Facebook shares will be made available to the market. In November, 1.2 billion insider shares will be eligible for sale. How many of those who sell will be Californians? At what price will they sell? And, at what cost to California?
When will California realize it’s Facebook losses? Unlike Thiel and the others, California cannot sell to raise cash.