Peter Thiel Sells Majority Of His Facebook Shares In Deal Planned Pre-IPO

http://techcrunch.com/2012/08/20/peter-thiel-sells-majority-of-his-facebook-shares/

by nikhilpandit • 14 years ago

108 90 14 years ago

grandalf2• 14 years ago

I'm going to buy when it gets closer to $10 per share. Half the world uses Facebook every day so let's not pretend it isn't an awesome business with utterly massive potential.

joelrunyon3• 14 years ago

"awesome business" and "massive potential" aren't mutually exclusive events. It can have massive potential, but never deliver and still be a terrible business.

Sure, it's got a lot of upside if you can buy it at the right price, but up till now, it hasn't shown advertisers (who make up the majority of their revenue) that it can deliver customers as acceptable CPAs. Until that happens, we'll still be waiting for facebook to be an "awesome business."

grandalf2• 14 years ago

I don't think CPAs are the right metric. Facebook is massively engaging. I think TV is the most natural synergy b/c people socialize around it today but only in one household.

Facebook should also launch a web search similar to Google just go capture some market share in search-driven advertising.

Around the world, Facebook is the fastest loading website (it often beats Google). Its infrastructure is ready to make a truly global play of some kind.

Expect something huge after the stock price stabilizes a bit.

batgaijin2• 14 years ago

See, I hate arguments for this.

How many new accounts did you create annually 10 years ago? How many new accounts did you create annually 5 years ago? How many new accounts did you create this year?

People don't mind switching, and in fact they don't mind having simultaneous accounts. People on this forum think that they are 'special' inasmuch they don't mind negotiating multiple accounts with relative ease, but it's an inevitable tactic.

Facebook can be used to login to other sites, but with Google+ and Twitter and the $20 share price, nobody small wants to bet on Facebook. It's like making an Xbox 360 exclusive game if there was a $0 porting cost.

If Facebook is bought out by Microsoft or Apple, it will truly be a threat as a universal login system. But until then, they will die a death from a 1000 paper cuts.

robryan2• 14 years ago

I see facebooks problem right now more as an inability to effective monetize their users, rather than at risk of a large set exodus any time soon. Facebook is very ingrained in what so many people and businesses do now unlike any other web service has been. You see Facebook branding on most businesses ads and physical locations.

Of course it is possible to overcome these network effects but I think that if they are smart enough they can keep it going. Then it just becomes a question of what valuation they can sustain without being so invasive as to completely alienate their userbase.

On an anecdotal level I have seen people try things like Path, Instagram, the location based networks etc. Most when the mental overhead of all the social networks get to much eventually just mainly settle back on Facebook (with Twitter being the only real exception)

phaus• 14 years ago

Facebook may stick around for years to come, but I disagree that it's an awesome business. Unless oriented towards professional profiles (like LinkedIn), social networks are a terrible idea. Just because everyone likes something, doesn't mean it it's in their best interest. Facebook is just a voluntary invasion of privacy. Right now most people are either using Facebook to post memes and soft core pornography that they find elsewhere, bitch about how their lives are more difficult than everyone else's because they have a job(try not having one for a while), or to stalk their current / former significant others.

I myself prefer more direct and personal forms of communication like Skype, Instant Messaging(Facebook Chat is merely adequate), phone calls or email. Unfortunately, I am saddled with Facebook because everyone I know has abandoned all other forms of communication.

beagle3• 14 years ago

Where does the magical $10 number come from in this decision of yours?

ThomPete3• 14 years ago

Facebook have a problem that Google hasn't.

1. Their social graph is great but it has one major flaw. It's very bad at profiling intent.

They also have a problem they share with Google.

2. They haven't found a way to make advertising work on mobile, an increasing part of their visits.

Unless they find a way to solve those two areas they will not be able grow their revenue without hurting their visitors.

r00fus2• 14 years ago

> 2. They haven't found a way to make advertising work on mobile, an increasing part of their visits.

And herein is the problem: Apple - Apple is so against advertising that they created their own iAd network to keep other companies out of the game (it doesn't have to really be a success - just enough to keep devs off competing ad networks).

As long as Apple is influential in the mobile world, Google and Facebook are going to have a tough time with mobile ads... do consumers actually want ads? Apple is betting no, and as far as they're concerned - screw the devs and advertisers.

ThomPete3• 14 years ago

Hmm

Actually I think the problem is bigger than that.

Android is a more popular mobile OS than iOS by far and in fact googles reason for approaching it that way is that they want a platform to serve ads on.

But so far they havne't managed to find a way to do it.

samstave2• 14 years ago

This is also because the business model of apple vs FB|GOOG is completely opposite. People pay apple for their products. People expect everything from Google and FB to be free.

People are paying apple for their products and do not want to pay to have that product riddled with spam.

Frankly, FB has to figure out how to make a search service, via fb.com and their mobile apps.

An interesting twist could be to allow users to search for things that other users are doing or planning to do. e.g. "who is interested in going to the movies tonight?" and let a group organize around that activity - then sell them discounted movie tickets.

diego• 14 years ago

It's not just the graph. Intent is very fleeting. You can't know "instantaneous intent" from someone's history and graph (e.g. what will be my next Google query?)

More about this point on my blog if you're interested: http://diegobasch.com/facebook-and-twitter-dont-know-what-yo...

ThomPete3• 14 years ago

Yeah I think that is what I am saying.

dkrich• 14 years ago

I think this is just thiel putting his money where his mouth is. Anybody who has followed him knows it's no secret that he's spoken out against companies solving small problems and has even implied facebook to be squarely in that camp.

jamesmcn• 14 years ago

It is worth highlighting that this sale was via a Rule 10b5-1 trading plan. That is, Thiel made the decision to sell prior to the IPO.

rootedbox4• 14 years ago

A facebook insider decided that facebook wasn't worth keeping his money in prior to the IPO. That is highlightable..

izak30• 14 years ago

By the reports, he made 800x on his investment. He's held on for a while already.

prostoalex• 14 years ago

He converted a $500,000 investment into more than $1,000,000,000, which is at least 200,000% ROI. Would you recommend against diversification at this point? Do you provide financial advisory services by any chance?

qq663• 14 years ago

Would you expect him to do anything else? Invert the question: if you had $500 million cash, would you spend it all on Facebook stock? Or Google stock? Or any one stock?

Even for company insiders who really believe in the future of their company, it isn't prudent to hold more than a small fraction of a billion-dollar fortune in one stock, from a purely rational perspective. Of course, the public expects irrationally enthusiastic behavior from founders, which is the only thing that leads to the gigantic fortunes amassed by the Gates/Ellisons of the world.

cfront3• 14 years ago

Is this some sort of extreme cognitive dissonance?

Why can't people just accept that Facebook is a fad?

It does not mean the world is going to end. It's a fad, not a solid company. We went through this before 12 years ago. Eventually the market figures it out. Move on. That's what Thiel is doing.

More fads are around the corner. Investors will keep falling for the same old tricks.

Gates and Ellison are very poor comparisons. Their software was not web-based (=ad-based), their main market was the enterprise and they went to great lengths to create long-term customer lock-in. They began in a different era, and are nothing like Facebook, which is a photo-sharing website that relies on display ads and game-playing "whales" to make money.

mikeryan• 14 years ago

It's fad, not a solid company.

I'm pretty bearish on Facebook's stock, but there's nothing here to indicate its just a fad. This is a company with over a billion dollars in revenues per quarter with a pretty consistent 15-25% profit margin.

Is it the next Google? Its looking more and more like its not, but that doesn't mean its going to be the next Yahoo! either.

qq663• 14 years ago

Not sure how I can explain it any further than I already did, but diversification is smart regardless of what company you've founded.

Even if you've created a company which cures cancer, educates the world's children, and solves global poverty at a 40% profit margin, once you have 100% of your multi-billion dollar fortune tied up in it, it's time to diversify.

saraid216• 14 years ago

> Why can't people just accept that Facebook is a fad?

I actually made the prediction that Facebook would be where MySpace is--forgotten and irrelevant by the mainstream--by 2006. I was wrong.

xpose2000• 14 years ago

Facebook a fad? Think of it this way...

The social web is just as important as search on the web. The web will always have search engines, and it will always have social networks. Google took over where Excite and Altavista left off. Facebook took over where MySpace and Friendster left off.

Google controls the majority of the social search market. Facebook controls the majority of the social network market.

So you might be saying, that's nice, but Facebook can't monetize it's users!

Have you ever looked at Google search results lately and noticed that nearly 1/2 the screen above the fold could be ad space? Don't believe me? Search for "iphone".

Yet we all think nothing of it. We've accepted it as users of Google.

Imagine if Facebook found a way to get it's users to ACCEPT ads. Start small, like Google and gradually increase it over time to what it is now.

That doesn't sound far fetched does it?

PakG1• 14 years ago

Eventually the market figures it out. Move on. That's what Thiel is doing.

Thiel is an investor. Most investors eventually move on. He invested in 2004. 8 years, and he netted a billion dollar cash profit so far on a $500,000 investment. He's not in it for long-term company building like Zuckerberg is. He's not trying to be Warren Buffett. He shouldn't be panned for this. And he still owns millions of shares. So it's not like he's completely out.

aasarava• 14 years ago

Everyone keeps focusing on Facebook as an ad platform, and pointing to the difficulty in monetizing mobile via ads. But I'm betting Facebook is on the brink of rolling out a digital wallet. They already act as an authentication/identity service with hundreds of millions of users. If those users linked their FB accounts to their bank accounts, they'd be able to buy anything on any integrated website that they log into with FB Connect -- or eventually in any store that wants to handle FB payments. With FB taking a small cut of every transaction, I imagine PayPal and Stripe would be in trouble, no? Mobile doesn't have to be about ads....

brk• 14 years ago

Given their past approach to several privacy and sharing type issues, there is no way in hell I'm buying anything with a Facebook wallet.

ricree• 14 years ago

Nor will I.

But judging by the past response to privacy issues, there are a lot of people that will complain for a week before jumping headfirst.

tedunangst2• 14 years ago

Which of the following companies paid an FTC fine for sharing user data, Facebook or Google? Do you trust that company with your money? :)

J-H• 14 years ago

The problem here is would you trust Facebook with your wallet? I wouldn't, and I'm betting most wouldn't after all of Facebook's Privacy gaffes.

untog• 14 years ago

I'm betting most wouldn't after all of Facebook's Privacy gaffes.

I think you overestimate the extent to which average users are aware of/care about Facebook's privacy gaffes.

freehunter• 14 years ago

The thing is, those privacy incidents weren't gaffes: they were intentional. As far as I know, Facebook has only had one unintentional mistake when they accidentally DoS'd themselves. There might be more I'm forgetting, but the point still stands. Facebook didn't reset people's privacy settings by mistake.

Getting into payment processing will expose them to SOX and PCI compliance. They'll still be able to reset your privacy settings for your profile, but they'd be sued out of business if they did something like that for your payment profile. No matter how much it looks like they do, Facebook rarely makes mistakes.

batgaijin2• 14 years ago

They waould want NFC control to leapfrog, so I'd bet on a FB phone and apps for others

marquis• 14 years ago

I read of a bank in New Zealand doing this. Perhaps it's a trial? http://tvnz.co.nz/business-news/bank-app-allows-payments-fac...

brudgers• 14 years ago

>"I'm betting Facebook is on the brink of rolling out a digital wallet."

I'm betting they're on the brink of slicing dicing and selling everyone's personal information. It's more profitable. It makes use of their principle asset. There are few comparable companies to act as competitors. It's a really big and lucrative market.

And it solves their problem with monetizing mobile.

daveying99• 14 years ago

You could both be right. Login with Facebook, buy with 1 click. And let the merchant know all kinds of information about you to show you the right products.

cmircea• 14 years ago

Google already has this with Checkout (now Wallet) and it isn't terribly popular.

Ryan_Shmotkin• 14 years ago

Thats what up at previous discussion http://news.ycombinator.com/item?id=4042495

dj2stein92• 14 years ago

The Facebook story is over. They got ahead in the social network game of making communication over the Internet easier. They did this by making Email obsolete. One centralized system where all users can send instant messages to one another without remembering user logins, email addresses, or phone numbers. This is the ONLY advantage Facebook has over its competitors. And I guarantee their current advantages are going to be eroded away by more open protocols. In the same way that Twitter's current advantage in microblogging is also going to be eroded away.

If you get too far ahead of everyone else you become the target, and there are simply so many startups and smart brains working against Facebook and Twitter at this point that they simply will not be able to maintain their leads indefinitely (which is what their market values are incorrectly predicting).

csallen• 14 years ago

You're focusing only on features, and ignoring the fact that Facebook has more active users on their site for more time per day and with a higher retention rate than any other site in existence, and that network effects have created an almost insurmountable barrier to entry.

dj2stein92• 14 years ago

You know who currently has an even better advantage in social networks? Cell phone carriers. If I take a look at my Facebook friendlist or feed, and compare it to the last calls and messages made on my cellphone -- they don't match up at all. That means, at least to me, Facebook's graph for me doesn't relate at all to my real world social network, and so most of its value is probably artificial.

Certainly no system ever built can match Facebook's penetration rate, but it will probably always pale in comparison the real world social network. The difference is mobile devices are going to map a lot better to the actual network in ways that Facebook will be unable to capitalize on.

001sky3• 14 years ago

The market is concluding FB is not likely $1 trillion company. The Q is order of magnitude for FB $TEV.

A. $1000B ? No... B. $100B? Maybe C. $10B? Possible

I think Theil is obvi not betting on $1T.

Thus, after 8 yrs, time to go.

At ranges between B and C, holding a large position in a public stock that is exhibiting true volatility (ie, something other than upward drift), is not likely to please his LP investors.

Nor, similarly would it be advised for his own holdings.

Reading more into the tea-leaves (ie, operationally) might be fun, but I'm not sure its adding explanatory power to what we are seeing here.

dutchbrit2• 14 years ago

Peter, if you are reading this, there's one question I'd love to ask. Why did tou even buy Facebook shares in the first place? Just to say you owned a part of Facebook? It was a clear failure from the beginning when they hit the market, way overpriced - surely you must of known this too. And then comes why other question. Why sell now, after loosing so much money? If you were willing to take a gamble in the first place, you should of been prepared to stick with it for a few years - it might go back up, but that's only if FB manage to get their shit together.

benjaminwootton• 14 years ago

Did you even skim read the article? He invested $500k as one of their earliest investors, and turned that into $400 million. He sold when he did because of a lock up period.

dutchbrit2• 14 years ago

Christ, I must of been asleep while reading that article! You're right.

jamesaguilar3• 14 years ago

I wish I could take back my downvote. T_T

rdl• 14 years ago

Selling before the end of the year saves him over a hundred million in capital gains, too.

sytelus• 14 years ago

The 10b5-1 is actually bit fuzzy on whether you can cancel trading plan. SEC basically says that if you cancel the trade than you are not legally liable because no transaction actually occurred and so one cannot claim that you profited from insider trading. So in theory you can cancel the trading plan if you like. However if SEC feels that you cancelled only because of price drop then they can come after you for ALL your future trading plans or may even re-examine previous trades to see if you were trying to game the system. Therefore executives are advised by to cancel only under extraordinary circumstances.

So I think Thiel had lot of legal pressure, although technically not an obligation, to sell as per his trading plan filing. He could have taken risk but it's probably not worth it for another half-a-billion of profit if you are already multi-billionaire and if you are already cultivating 1000X returns as it is.

On the other hand it is surprising that he decided to sell most of his stock instead say only quarter or so. I would think Thiel as a long term investor in FB from what I've read in the book "Facebook Effect". Thiel is one of the few person that probably knows most upcoming plans and products in works and problems at FB. A typical strategy for investors like Thiel is to cash out in stages instead of dumping most stock at once like regular VCs do (10-25% each quarter, for example). Considering his level of insider knowledge this only means he did not expect FB stock going up at the time of trade filing in at least 1 to 2 year horizon.

This is even more surprising because I keep thinking FB is going to come out with something like AdSense any day now and almost instantly double its revenues bringing stock back to $25-30. Obviously Thiel has calculated things differently.

Peter Thiel Sells Majority Of His Facebook Shares In Deal Planned Pre-IPO

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