Facebook is in the middle of three major new “lockup” releases in which early investors and employees can finally sell.
The first came on October 29. The stock has dropped from $22 to $19 since then as many insiders have headed for the exits.
The second release, which is much larger, will hit this Wednesday, November 14.
The third will hit December 14.
Additionally, several of Facebook’s senior executives, including COO Sheryl Sandberg, have received the huge restricted stock grants they have earned over the past few years and converted their shares into tradable common stock. And they have begun selling regularly.
The amount of Facebook stock that will become available for sale in this six week period is staggering. Here are the broad numbers:
- On October 28, Facebook’s “float” was 692 million shares (stock available to be sold in the public market).
- On October 29, an additional 234 million shares (and options) were released
- On November 14, an additional 777 million shares will become available for sale
- On December 14, an additional 156 million shares will become available for sale
- On May 18, 2013, an additional 47 million shares will become available for sale
All in, nearly 1.2 billion new shares will become available for sale during these 6 weeks, which is nearly twice the current float. By mid-December, Facebook’s float will be 1.9 billion shares.
Many of the folks who own these shares—former employees, current employees, and early investors—have been holding the stock for a long time and are presumably eager to cash out of at least a portion of their holdings. So there would seem to be a good chance that more of this stock will hit the market in the next couple of months.
Those who believe in market efficiency will argue that, because everyone has known about these lock-up releases, Facebook’s stock price has already taken them into account. That’s possible. But it’s also possible that one or more of these releases will be accompanied by news (or inference) that big Facebook insiders are dumping almost every share they own, the way Facebook board member and early investor Peter Thiel did in the first lockup release. That news clobbered the stock last time, and it could clobber it again this time.
Facebook’s Employee Stock Units Have Now Vested
The latest lockup release followed the vesting of restricted stock units (RSUs) that most Facebook employees who joined the company before 2011 were given when they joined. Facebook converted these units into Class B shares and then withheld about 45% of the shares to pay the employees’ income taxes (just the way the company would withhold taxes on cash compensation).
These units converted into a total of 225 million shares and vested at a price of $23.21 per share.
Thus, the vesting of stock units resulted in an immediate compensation payout of $5.2 billion to Facebook employees who joined the company before 2011, of which $2.3 billion was withheld.
All of this stock is now available to be sold.
Some of Facebook’s senior executives received huge payouts in this conversion. These executives included:
- Sheryl Sandberg, COO: 34 million shares worth $790 million at conversion. 15 million of these shares were withheld. Sandberg converted the remaining 18 million to Class A common stock that can now be sold.
- David Ebersman, CFO: 4.2 million shares worth $97 million at conversion. Ebersman retains 2.2 million shares of Class A common stock that can now be sold.
- Theodore Ullyot, General Counsel: 2.5 million shares worth $58 million. Ullyot retains 1.4 million shares that can now be sold.
- David Fischer, VP of Marketing: 1.1 million shares worth $26 million. Fischer retains 568,282 shares that can now be sold.
- Micheal Schroepfer, VP Engineering, ~3 million shares worth $70 million. Schroepfer retains 1.5 million shares that can now be sold.
- David Spillane, Chief Accounting Officer: .7 million shares worth $16 million. Spillane retains 416,479 shares that can now be sold.
All of these senior executives will only be allowed to sell under so-called 10b-5 sales plans which set up regular sales in advance. Some of the execs, including Sandberg, have already begun selling small portions of their holdings via these plans.
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