Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Facebook: The End of the Gravy Train

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Facebook is no longer on sale.

According to blogger Valleywag, the social superstar's 700 or so employees will not be able to sell stock as had been promised. Writer Owen Thomas quotes an email apparently sent by CEO Mark Zuckerberg to employees, the veracity of which VentureBeat has since confirmed:

I'm writing this note to let you know some bad news. Despite a lot of work, we have not been able to finalize a plan for the employee stock sale we announced in August.

Facebook's response to VentureBeat speaks of how the economy is in the "midst of an incredibly difficult period, and all companies have been affected in some way."

Well ... yeah. But tell me, oh masters of the obvious, what does a rotten economy have to do with a stock redemption program?

We Fools generally counsel against selling in times like these because you're almost guaranteed to lock in losses. But I'm not your dad. I know that investors sell for many reasons. I don't think your broker ought to prohibit you from selling just because my colleagues and I think lots of stocks are selling for bargain-basement prices.

Shouldn't the same be true of Facebook? Ideally, yes, except that the private equity market is far less liquid than the NYSE or the Nasdaq. Which means that well-heeled investors can demand more generous terms than they might were Facebook already public.

And that's exactly what they appear to be doing. Thomas cites an anonymous source "close to potential investors" who says that they're looking to buy either preferred shares a la Microsoft (Nasdaq: MSFT  ) or common shares at a valuation less than the $4 billion Facebook set for itself.

Essentially, Facebook has the same problem its public peers have: Investors want a deeper margin of safety than is currently available. So, Google (Nasdaq: GOOG  ) , Yahoo! (Nasdaq: YHOO  ) , and MySpace parent News Corp. (NYSE: NWS  ) are all trading near 52-week lows.

This once-and-future stock redemption isn't just about the economy, Fools. It's about getting proper terms before authorizing sales. Proper terms that, apparently, aren't available right now.

Get your clicks with related Foolishness:

Google is a Rule Breakers recommendation. Microsoft is an Inside Value pick. Try either of these market-beating service free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers had stock and options positions in Google at the time of publication.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 789078, ~/Articles/ArticleHandler.aspx, 10/21/2016 7:59:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
MSFT $59.66 Up +2.41 +4.21%
Microsoft CAPS Rating: ****
FOX $25.91 Up +0.55 +2.17%
Twenty-First Centu… CAPS Rating: ***
GOOGL $824.06 Up +2.43 +0.30%
Alphabet (A shares… CAPS Rating: *****
YHOO $42.17 Down -0.21 -0.50%
Yahoo CAPS Rating: **