Back in September 2004, Peter Thiel invested $500,000 in Facebook (NASDAQ:FB), which had a valuation of about $4.9 million. It surely turned out to be one of history’s greatest deals.
But since Facebook’s IPO, Thiel has been aggressively unloading his shares. He sold 16.8 million at the time of the offering and 20 million last week — a value that comes to about $1 billion. Now he only has 5.6 million shares left. And yes, investors should be concerned.
Keep in mind that Thiel has been on Facebook’s board since April 2005. So, he has a deep understanding of the company as well as its prospects.
Thiel has also proven to have a good knack for timing. As the co-founder of PayPal (now owned by eBay [NASDAQ:EBAY]), he raised $100 million in April 2000, just a week before the dot-com bubble popped. He also went on to make well-timed investments in companies like SpaceX, LinkedIn (NYSE:LNKD) and Tesla (NASDAQ:TSLA).
Interestingly enough, Thiel is more than just a tech guru. He also has a long background in finance. In 2002, the started Clarium Capital Management, a hedge fund that focuses on macro strategies. He even worked at Credit Suisse in the mortgage securities department.
As a result, Thiel understands how fickle the markets can be. Just look at the huge declines in other IPOs like Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA). Why not Facebook, too?
It’s true that insider selling is normal for any IPO. After all, Thiel has been a long-term holder of the stock. The problem now is that it looks like he has little confidence in the company’s future. Consider that most large investors will dribble sales over time — not unload most of their position.
But again, Thiel knows how to make money — and this often means protecting large gains. In light of Facebook’s high valuation — at 67 times earnings — and deceleration in revenues, it looks like he’s made another smart move.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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