When most people think of Silicon Valley, they think of boyish geniuses, intellectual dreamers and perpetual tinkerers.
Rarely does the mention of Silicon Valley conjure up the image of a capitalistic financial raider like Gordon Gekko of “Wall Street.”
But now you have Peter Thiel, the very influential Silicon Valley icon of PayPal fame and an early investor in Facebook, dumping some 90 percent of his Facebook holdings within days of the lockup expiration, as was revealed last week in an SEC filing. And that’s at prices between $19 and $21 a share — half the $38 IPO price.
Embarrassingly, Thiel is also a board member at Facebook. The message is getting clearer: The American investor just got bagged by another hyped up Silly-Con Valley initial public offering.
The problem with Facebook wasn’t so much the product or the company, it was the valuation that the unsuspecting public and naive investors paid for it.
It was the hype, from the IPO countdown clock on CNBC to published photos of “The Hooded One,” CEO Mark Zuckerberg, entering Morgan Stanley headquarters in Midtown.
For a new company like Facebook to do more than $3 billion in revenues last year and $1 billion in profits is amazing. It is, however, equally amazing that investors paid upward of 100 times earnings and 30 times revenues for the stock.
That was an insanely high valuation — a valuation so high that many insiders cashed in right at the IPO, telling you something about their vision for the future and the price of Facebook’s stock.
Now that it has fallen some 50 percent in 90 days, Thiel bailing out of an additional 20 million shares, leaving him with only between 5 percent and 10 percent of his original position, is downright chilling.
How does a director of a company go to a board meeting after selling 90 percent of his stake?
Was it for estate-planning purposes? Did he want to diversify his portfolio? Or maybe he thought the valuation was a tad too rich?
Hard to know, but you would have to think it’s not a buying opportunity yet on Facebook.
