Facebook’s share price declines on $3.9 billion share sale

on Dec 20, 2013
Updated: Oct 21, 2019

iNVEZZ.com Friday, December 20: Shares in Facebook (NASDAQ:FB) closed almost one percent lower yesterday after the social network announced that Mark Zuckerberg and other shareholders will be selling a total of 70 million shares to the public. In preparation for its inclusion on the S&P 500 index, Facebook said it would sell a little over 27 million shares, while certain shareholders are selling 43 million shares. The bulk of the stockholder sale comes from founder and chief executive Mark Zuckerberg, who will sell over 41 million of his shares or a stake worth about $2.3 billion (₤1.41 billion) at Facebook’s Thursday closing price of $55.05.

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The follow-on sale, the first that Facebook has initiated since its initial public offering in May 2012, will raise about $3.9 billion (₤2.4 billion). “It’s never a positive sign when insiders are dumping massive quantities of stock,” commented Todd Lowenstein, a portfolio manager with Highmark Capital, as quoted by Bloomberg. Yet “the company is now being added to the S&P 500 Index so there will be large demand for the shares from index buying and index hugging money managers. So it seems this will be absorbed without much disruption.”

In its disclosure to the Securities and Exchange Commission, Facebook didn’t provide details about the use of the proceeds from the stock sale. The social network only said that it was looking to “obtain additional capital” and has no “specific uses of the net proceeds planned”.

Zuckerberg intends to exercise options on 60 million Facebook shares and then plans to sell 41.35 million of the newly converted shares, with the majority of the net proceeds “used to satisfy taxes that he will incur”. According to a Wall Street Journal analysis, the chief executive will have $1 billion (₤617 million) remaining after paying the required taxes. Zuckerberg is also donating 18 million shares – valued at about $990 million (₤606 million) – to the Silicon Valley Community Foundation, a non-profit organisation in Mountain View, California. This will be his second donation to the organisation, after he gave another 18 million shares in December 2012.

**Facebook’s video ads**
On Tuesday this week Facebook introduced a long-awaited video advertisements feature, which will be slowly incorporated in users’ newsfeed. The ads will play automatically as users scroll through their feed and can be stopped if the person scrolls past them. Facebook hopes that the latest feature will help it grab a slice of the $66 billion (₤40.4 billion) annual US TV advertising pie.

A lot of advertisers are expected to be left out of the market. Facebook is charging about $2 million (₤1.2 million) per day for the ability to reach its 140 million US users aged 18 to 54, according to industry sources. Still, many marketers appear enthusiastic. “Video is really powerful,” Shelby Saville, managing director at media agency Spark, said as quoted by the Wall Street Journal. “Using sight, sound and motion is a way to get consumers to have an emotional connection to the brand, if it’s well done,” she added.
**As of 13.15 UTC buy Facebook shares at $55.06.**

**As of 13.15 UTC sell Facebook shares at $55.04.**
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