Facebook’s strategy to improve the confidence of investors and value of its shares

 

Facebook has adopted a new strategy for share market

Mark Zuckerberg, CEO Facebook, has announced on Tuesday that the stocks of the company will not be sold for the next 12 months despite the coming expirations of lock-ups. This move by the company will give confidence to the investors by prohibiting insiders from selling shares for a limited time.

The company has taken this step in the time when Peter Thiel, a Facebook director and its earliest investor, sold much of the holdings in the company last month.

The company has added in the regulatory filing that two of the nonexecutive directors, Marc Andreessen and Donald Graham, would sell shares for the coverage of tax liabilities but additional stocks will not be sold. Zuckerberg, who is the owner of the 444 million shares of the company’s class B common stock, is also not conducting any sale transaction.

The company has reported that as a result of this move its total shares outstanding would be reduced by about 101 million shares. The company has also added that the stocks would not be sold to cover nearly $2-billion tax bill associated to the stock compensation. Moreover, the company would use cash and credit facilities.

“The fact that they are using cash is a good thing. It feels like a mini buyback in a way because you’re in essence reducing your share count by 101 million shares,” said Susquehanna Financial Group analyst Herman Leung.

On Tuesday, the stock of the Facebook fell to a record low since its initial public offering in May. However, this news came with a slight beneficial impact on the stock in the after-hours trading and the shares of the company rose by about 2%.

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