CEO Mark Zuckerberg won't sell his holdings in Facebook for at least… (Kevork Djansezian / Getty…)
Facebook said Tuesday that Chief Executive Mark Zuckerberg would not sell stock in the company for at least the next 12 months, a move to reassure investors spooked that shares will flood the market when lockup periods that allow insiders to sell stock expire in the coming months.
The social networking giant was looking to do some damage control after Peter Thiel, a Facebook director and its earliest investor, sold most of his holdings in the company last month.
In a regulatory filing after financial markets closed Tuesday, Facebook said two of its board members, Marc Andreessen and Donald Graham, plan to sell shares to cover tax liabilities, but would not sell additional stock.
The company also said it would not sell stock to cover a nearly $2-billion tax bill related to stock compensation and that it would instead use cash and borrow from its credit facilities. The moves reduce by about 101 million the total shares outstanding.
“This is taking some of the sting away from the lockups, but there are still a lot of shares set to unlock,” Wedbush Securities analyst Michael Pachter said.
On Tuesday Facebook’s stock fell to a record low since its initial public offering in May after two analysts for its lead underwriters cut their price targets. It closed down 33 cents at $17.73, but rose to $18.07 in after-hours trading.
“The Street has been heavily focused on the large lock-up expirations coming in October and November, and we believe the combination of taking Mark Zuckerberg’s shares out of that equation and also shrinking the outstanding share count by 101M shares (~3.7%) shows management's confidence in Facebook’s long-term story,” J.P. Morgan analyst Doug Anmuth wrote in a research note late Tuesday.
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