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Correction: Facebook-Lock-Up story
Zynga Inc., the company behind “FarmVille” and other games played largely on Facebook, was sued last month for waiving lock-up restrictions for insiders, including Pincus, before the company’s first-quarter results in April.
“The only people who would sell are people who need the money,” Pachter says. “I would be very worried if Sheryl Sandberg or Ebersman sell, but they are not that dumb.”
Following this week’s lock-up expiration date, about 243 million more Facebook shares and stock options will enter the public stock market between Oct. 15 and Nov. 13. That’s when current and former Facebook employees will be able to sell stock they earned as compensation.
Then there’s the Nov. 14 expiration, and another a month later. Next May, a year after Facebook’s IPO, the Russian Internet company Mail.ru Group and DST Global _ both of which made early investments in Facebook _ will be able to sell their shares.
The early investors who sold their stock to the public as part of Facebook’s IPO did so at $38 each. If they sell now, they will make far less money from each share than they did in the IPO. Facebook’s stock has not hit its IPO price since its first day of trading. As a result, the company’s market value has plummeted from $104 billion to $59.1 billion in roughly three months.
Goldman Sachs and a few other investors are in an unusual position to profit if they sell Facebook’s stock at its current price. A January 2011 investment round from Goldman Sachs and others valued Facebook at $50 billion.
Even before Facebook’s IPO, Silicon Valley merchants _ those who sell real estate, cars and other luxury items _ had been expecting a boost to the local economy from rank-and-file Facebook employees who received stock options as part of their compensation. Now, experts are cautioning those merchants to temper their expectations.
“In light of the company’s market value being half of what was expected, and the fact that the big gainers are not in Silicon Valley year-round, I would not expect a new boom in Silicon Valley resulting from this,” Zaleski says.
Jon Burgstone, professor at the Center for Entrepreneurship and Technology at the University of California, Berkeley, points out that many of Facebook’s shareholders had already been able to sell their stock through private stock markets before the company’s IPO. In many ways, he added, “Facebook’s IPO was really a secondary public offering. A number of large shareholders and early employees have already been cashing out.”
As for flashy cars and fancy clothes?
“People here generally don’t spend their money on expensive clothing, jewelry, etc.,” Burgstone says. “The ethos of Silicon Valley remains _ what have you done, and what can you do now? _ not what label are you wearing.”
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