PayPal co-founder and famed investor Peter Thiel has sold the majority of his shares in Facebook, according to an SEC filing. Thiel has sold 20.6 million Class A shares, leaving him with only 5.6 million shares, all of which are Class A.
A significant portion of the filing seems to be on behalf of the Founders Fund, in which Thiel is a partner. Other entities named in the filing include Lembas LLC and Rivendell One LLC, both of which are Thiel holding companies and Lord of the Rings references.
Thiel sold the shares at an average price of $19.73, earning him nearly $400 million for his original $500,000 investment.
As Bloomberg reported last week, Thiel converted 9 million Class B shares (which have greater voting rights, but are more difficult to trade publicly) to Class A shares before Facebook's post-IPO lock expired, signaling that he could be moving some of his shares.
It's tough to read too much into this right now. On the one hand, Thiel has held the stock for eight years and he could just be making a business decision to move on.
On the other hand, it isn't good for Facebook that one of its earliest and most high-profile investors is selling the stock while it's down to almost half its IPO price. Imagine being a Facebook employee right now and seeing Thiel sell the majority of his stock at what many are hoping is its low point. Just a few days ago, CEO Mark Zuckerberg told employees in a meeting that the stock drop has been "painful." I wonder how will he describe the drop at the next Facebook Board of Directors meeting, on which Thiel sits.
Update: This deal was pre-arranged before Facebook's IPO, when the stock was at $38 not $20. From the SEC filing:
1. The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on May 18, 2012.
Thiel was able to formally sell on Thursday once the lockup ended. Per SEC rules, he had 2 full business days to file the sale and he took the full time available. Why?
Wouldn't be surprised if Thiel held on a few days after the lockup to avoid negative signaling.
— Nicholas Carlson (@nichcarlson) August 20, 2012
Update 2: Some readers have been asking if Thiel had to sell his shares or if he had an option to sell his shares. The Rule 10b5-1 trading plan he filed on May 18th is exactly what it sounds like–a plan to trade shares, not an option to trade shares. The SEC rule deals with insider trading, as Thiel is on the Facebook Board. It isn't clear if the trading plan was binding (i.e. if Thiel could have decided on Thursday to cancel the trade), but I've reached out for comment and I'll keep you posted.
Unsurprisingly, both a spokesperson for Facebook and Jeremiah Hall, a spokesperson for Peter Thiel, declined to comment.
Peter is Clarium Capital's President and the Chairman of the firm's investment committee, which oversees the firm's research, investment, and trading strategies. He is also a managing partner at The Founders Fund. Before starting Clarium, Peter served as Chairman and CEO of PayPal, an Internet company he co-founded in December 1998 and was acquired by eBay for $1.5 billion in October 2002. Prior to founding PayPal, Peter ran Thiel Capital Management , the predecessor to Clarium, which started...
Facebook is the world's largest social network, with over 845 million monthly active users. Facebook was founded by Mark Zuckerberg in February 2004, initially as an exclusive network for Harvard students. It was a huge hit: in 2 weeks, half of the schools in the Boston area began demanding a Facebook network. Zuckerberg immediately recruited his friends Dustin Moskovitz, Chris Hughes, and Eduardo Saverin to help build Facebook, and within four months, Facebook added 30 more college networks. The original...
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