There seems tremendous excitement among the Facebook (FB) bulls about today's announcement that CEO Mark Zuckerberg has agreed not to sell any shares for a year. This is a total red herring. The reality is that Zuckerberg has already trousered billions from share sales. He patently has more cash than anyone can hope to spend in a lifetime. As such, were he even to sell a handful of Facebook shares, this would be seen as a cue for absolutely everyone to head for the exit.
The reality for poor Zuckerberg is that he is locked in for good. But today's SEC filing also serves as a grim reminder of just how many shares will become available for sale between now and Christmas. There are currently 692 million shares in issue and available for sale. If one includes highly in the money stock options that can be exercised and turned into shares for immediate resale, the number of new shares that will become unlocked before Christmas is 1.103 billion shares. And remember that many of those holding those shares paid well under a dollar for them, so selling even at $15 or $10 would allow them to bank mammoth returns.
Meanwhile, we are now told that Q3 numbers will be released on October 23. That is nine days after 124 million shares come out of lockup. If you were holding any of that stock, would you hang around for results before selling? Given that analyst after analyst is moving now to trim their estimates for the quarter and predicting ever decreasing amounts of revenue growth (let alone, heaven forbid, profits growth), do you really want to be holding a growth stock which is not delivering much actual growth?
That Zuckerberg will not be selling any more stock for a year is, as revelations go, right up there with the shock news that the Pope is a Catholic and that Mitt Romney thinks that having Swiss and Cayman Island bank accounts makes him able to relate to ordinary Americans. That Facebook bulls trumpet this as a reason for the rest of us to hold the stock is a sign of sheer desperation.
Earnings visibility is reducing (even the analysts seem to appreciate that now, not that the words are worth listening to) and this stock simply cannot absorb the welter of share sales that is on the way. On fundamentals, it remains worth only $5 a share, as I have noted here before. You should keep selling on the expectation that we will see a $10 stock price at some stage between Thanksgiving and Christmas.