As Facebook lockup restrictions unravel, we see more and more insiders cashing in to make their millions and billions off the public. Most recently, Peter Thiel, a man well-connected to what I call the legalized crime syndicate, just cashed out near $400 million taking his total winnings to almost $1 billion (Peter Thiel cashes out). Peter, why didn’t you hold your shares well into the future? If Facebook is going to live up to a $104 billion valuation, there is only upside in the stock. You could double your winnings if you think long-term…right?
But Peter isn’t the only member of the legalized crime syndicate cashing out. Remember, Reid Hoffman, the founder of LinkedIn and partner with Grey Lock Partners, also cashed out on the day of the IPO. Apparently, he also didn’t think Facebook is a long-term play, otherwise, why sell the majority of his shares? And by the way, these two “Reid’s” know each other from the days they worked together at PayPal. Amazing how these two pals turned their $500,000 investments into millions and billions….truly magic.
The Facebook IPO hauled in $16 billion dollars. The company Facebook only received $6.8 billion of those funds from the IPO as the rest went to the insiders. As of today, insiders have cashed in almost $14 billion dollars on the deal (Inside trades Facebook). Note that the insiders have pocketed double what “the company” Facebook has earned via the IPO process. And, as more lockup periods expire, we will see the ratio of insider wealth generation to Facebook (the company) wealth generation via the IPO process only increase. Meanwhile, the stock is half that of the original IPO price. Guess who is paying the insiders their $14 billion dollars? You are.