Six Facebook execs convert RSU to class-b shares

Steven Loeb · October 27, 2012 · Short URL:

Some 271 million employee shares of Facebook stock to be unlocked next week

Facebook had a pretty good week, with its third quarter numbers coming in higher than expected, and shares of its stock soaring as a result. But trouble could be on the horizon.

There are a number of lockups on Facebook stock that are about to expire, and they will definitely have an impact on Facebook’s investors. The next one will happen on October 29, when 271 million employee shares of Facebook stock will be freed. Facebook had waived a market stand-off provision that would have prohibited company employees from selling shares until November 14.

In advance of the lockup period ending in just a few days, six of Facebook’s highest ranking employees have filed forms with the Securities and Exchange Commission to convert their restricted stock units into class-B shares on October 29. More than 45 million shares will be converted.

The employees that are converting their stock are: Facebook VP general counsel Ted Ullyot, COO Sheryl Sandberg, marketing VP David Fischer, VP of engineering Mike Schroepfer, CFO David Ebersman and chief accounting officer David Spillane.

With the 234 shares that will be available to be sold, along with another 77 million shares on November 14, that accounts for 37% of Facebook’s shares that will be unlocked. Facebook has to be at least somewhat concerned about the possibility of a massive selloff, especially considering what happened the last time shares were unlocked.

Over 271 million shares were freed to be sold by executives and investors, in August. As a result, the stock hit its lowest levels yet at the time, dropping to 50% of its IPO price.

At least one prominent Facebook investor, Peter Thiel, sold off over 20 million shares of Facebook stock at prices between $19.69 and $20.70, netting him roughly $406 million.

Thiel had actually sold off his stock months before, using a rule that allows executives and directors in a company to sell their stock before they have any inside knowledge so that they cannot be accused of insider trading.

While it seems unlikely that six people with such high stakes in a company would go ahead and take actions that would effectively sink it, there is one executive that is absolutely not going to be selling.

According to an 8-K filed in September with the SEC, Mark Zuckerberg will not be selling his Facebook shares for at least a year.

Zuckerberg holds roughly 444 million shares of Class B common stock as well as 60 million shares of Class B common stock issuable upon the exercise of an option.

Two Facebook directors, Marc Andreessen and Donald Graham, also announced that would be selling off some personal stock to pay their RSU tax bill, but that they will not be selling off any shares beyond that.

The intention of Zuckerberg, as well as the two directors, to hold on to their stock has appeased some of the company’s underwriters, as this points to executives at Facebook have true confidence in the company. Now, it only remains to be seen if that confidence was justified. 

Facebook ended Friday down 2.74%, selling at $21.94 a share.

Facebook could not be reached for comment.

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