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Facebook Director Thiel Gets More Flexibility to Sell

August 15, 2012

Facebook Director Thiel Gets More Flexibility For Selling Shares

Peter Thiel holds more than 27 million Facebook shares, and most already carry Class A status, according to regulatory filings. Photographer: David Paul Morris/Bloomberg

Facebook Inc. (FB:US) director Peter Thiel, who sold more than 16 million shares in the company’s initial public offering, has given himself added flexibility to sell more of his holdings, a regulatory filing shows.

Thiel, one of Facebook’s earliest investors, converted more than 9 million shares to Class A from Class B, according to a document filed Aug. 10 with the U.S. Securities and Exchange Commission. Thiel, a venture capitalist and hedge-fund manager whose proceeds from the IPO topped $630 million, holds a stake worth more than $590 million.

Class A shares are more easily traded publicly, said Erik Gordon, a professor at the Ross School of Business at the University of Michigan. The status change could add to speculation that big investors -- such as Thiel and Goldman Sachs Group Inc. -- will sell shares when restrictions on sales are lifted. That, plus concern over advertising-sales growth, has dragged down Facebook shares 44 percent this year.

“It’s certainly not a vote of confidence when a guy who knows as much about it as Peter Thiel knows about it wants to get the rest of his stock into a position so that he can sell it quickly,” Gordon said.

Thiel holds about 27.9 million Facebook shares and most already carry Class A status, according to regulatory filings (FB:US). Other early holders, such as venture capital firm Accel Partners, hold mostly Class A shares. Of those held by Accel and its affiliates, 135.7 million are Class A, while 7.9 million are Class B, according to regulatory filings.

Lockup Expiring

Because Class B shares give holders greater voting power than Class A stock, Thiel also is surrendering some of his control over the company.

Facebook raised $16 billion on May 17 in the largest-ever technology IPO. Investors have been shunning the stock on concern over the company’s ability to make money from mobile users.

The lockup on shares held by investors begins to expire on Aug. 16. The move by Thiel doesn’t necessarily suggest that he’s bearish on the company’s prospects or that he’ll sell immediately, said Michael Pachter, an analyst at Wedbush Securities Inc.

Jonathan Cain, spokesman for Thiel, declined to comment, as did Ashley Zandy, a spokeswoman for Facebook.

Facebook, based in Menlo Park, California, increased 4 percent to $21.20 at the close today in New York.

Cashing Out

Thiel co-founded PayPal Inc. and served as chief executive officer until the company was bought by EBay Inc. (EBAY:US) for $1.5 billion in 2002. Thiel, as a member of the so-called “PayPal Mafia,” used his fortune to start hedge fund Clarium Capital Management and to invest in startups.

One of those startups was Facebook, a social-networking service devoted to college campuses at the time of the investment in 2004. Thiel invested $500,000 in Facebook and the following year co-founded a venture-capital firm called the Founders Fund. That firm is among the investment arms that have converted Class B shares to Class A.

Other Founders Fund investments include Spotify Ltd., Europe’s largest legal online music site, Yammer Inc., a social- networking service for businesses that was sold to Microsoft Corp. (MSFT:US) earlier this year. The firm also invested in Elon Musk’s Space Exploration Technologies Corp., or SpaceX.

While his investments have given him attention, Thiel has also gained notoriety in the field of education. He now uses some of his wealth in his 20 Under 20 Thiel Fellowship program, which pays students as much as $100,000 each, over two years, to leave college and pursue startups.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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