Stock sales by directors, poor analyst reviews and questions about corporate governance hit Facebook stock price in months after IPO.
Facebook chief executive Mark Zuckerberg has pledged to sell none of his company’s shares for at least a year after a series of stock sales by Facebook executives, a share-price outlook downgrade and questions over corporate governance sent the company’s stock price to record lows.
In a filing to the SEC, Facebook says Zuckerberg ‘has no intention to conduct any sale transactions in our securities for at least 12 months’. The announcement came hours after Facebook shares dropped to $17.55, the lowest price since the company launched its IPO in May. The stock closed the NASDAQ trading day at $15.73, down 53 percent from its debut trading price of $38 a share on May 17. The plunge has wiped more than $50 billion off the market value of Facebook stock. Earlier the same day, analyst Scott Devitt from Morgan Stanley, which was an underwriter on Facebook’s $16 billion IPO, lowered his target price for Facebook to $32 a share from $38 a share.
The target price represents the level at which the analyst expects the stock to trade in 12 months. JPMorgan, another underwriter of the Facebook IPO, also cut its target price on Facebook shares to $30 from $45. Both Morgan Stanley and JPMorgan maintain an ‘overweight’ rating on the shares, representing a recommendation to buy. Facebook’s share price has been repeatedly hit by several executives – most notably director Peter Thiel – selling large stakes in the company shortly after the lock-up period following the IPO permitted them to do so.
Thiel has sold more than $1 billion worth of Facebook shares. In Facebook’s filing to the SEC on Tuesday, the company warned that more sales by directors are expected soon: ‘We understand that two of our non-employee directors, Marc Andreessen and Donald Graham, intend to satisfy taxes incurred in connection with the vesting or settlement of their RSU awards by effecting sales of our common stock. Other than such tax-related sales, Mr Andreessen and Mr Graham have no present intention to sell any shares of our common stock held by them personally.’
Late in August, GMI Ratings, the independent ESG ratings company, said it may downgrade Facebook from its current ‘D’ rating to an ‘F,’ placing it in the bottom 5 percent of companies on its ratings list.
‘The company’s poor governance has been an unmistakable warning sign for investors to take heed, and a clear opportunity to avoid the resulting massive destruction in share price,’ GMI noted.
