It was yet more bad news for Facebook this week as one of its directors, Peter Thiel, sold most of his stake in the beleaguered company at the first chance he could. Whilst any director selling stock this early on in the public life of a company is unusual, what makes it more worrying is that Thiel was one of the earliest investors in the company, pumping $500,000 into the nascent website in 2004 and supporting it throughout its growth in the intervening years.
The development has been described as without precedent in the world of Silicon Valley Venture Capital, where investors typically hold shares longer, and sell them off at a far slower rate, in order to avoid flooding the market – which can reduce the share price – and to continue to support the company. Facebook was already under fire after a poorly handled Initial Public Offering (IPO) had seen its share price plummet around 50%, since initially floating for $38 a share in May this year. Advertising revenue figures have been disappointing, and earlier this month saw the revealing of a large number of fake accounts in existence. The broader question of how Facebook can monetise its users without driving them away remains, as does the question of how to adopt the site commercially on mobile devices.
Thiel has made around $1bn from unloading 80% of his shares, and joins Accel Partners, another early venture firm in getting out early – they have sold more than half the shares they originally owned. Of course, Thiel could simply be raising cash to fund his new investment firm, Mithril, in order to find new Facebooks, but the timing and scale of his exit from the company will do nothing to dispel fears that the company is losing its way.