Are Facebook Employees Cashing Out While They Can?

Are Facebook employees cashing out their stock to avert a decline in the shares' value?

It seems that Facebook employees may be leading a growing trend in Silicon Valley: Cashing in on their soaring stock shares before a feared tech bubble crash wipes away their liquidity as it did to so many a decade ago.

A story in The New York Times chronicles a few unnamed Facebook employees who recently left the company to sell their stock — since company policy bars current employees from cashing in their shares.

While these former Facebookers are not alone in the Valley, they are definitely leading the way, accounting for 45 percent of all trades on SecondMarket, a leading marketplace for secondary shares. The Times says that many of those sales are from the first 200 Facebook employees who joined prior to 2007, though the company won’t comment on those numbers.

While the newspaper is careful to say that employees have left for many reasons that include starting their own companies, acting before a feared decline in share price is a major consideration.

As Facebook’s valuation has soared past $50 billion… Many employees who own stock options and have been at the company since the early days after its founding seven years ago have been eager to profit. Aware of that, Facebook has helped to broker sales for those employees twice…and this year, in a deal through T. Rowe Price.

Employees were limited to selling up to 20 percent of their vested shares. But for some, that wasn’t enough.

One former Facebook employee told the Times, “Even if I could sell all 20 percent, having 80 percent of your wealth in one illiquid asset is pretty insane. It’s not enough to make yourself bulletproof if the world blows up.”

Another factor driving stock sales: hefty tax bills coming due for those who have cashed out some shares and need to pay Uncle Sam. Still, the paper says that there are many tech employees in the Valley who want to hold on to their shares in case the stock rises even higher.

Readers, when do you think Facebook’s share value will stop generally trending upward?

Publish date: June 20, 2011 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT