Analysts: Zuckerberg's Pledge to Hold Shares Isn’t a Buy Signal

Thursday, 06 Sep 2012 11:52 AM

By Michelle Smith

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Facebook CEO Mark Zuckerberg said in a regulatory filing that he would not sell his shares in the company for at least a year. This announcement breathed life into the stock price, which had been declining since Facebook's initial public offering in May.

But, analysts urge caution for those investors who now consider the stock attractive.

Zuckerberg owns 444 million shares of Facebook and 60 million shares connected to a stock option award. Many people have translated the fact that he could have cashed out on Oct. 29 but has pledged not to as a vote of confidence.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

His decision follows — and sharply contrasts — the decision by other big Facebook names to dump their shares.

Early investor Peter Thiel and co-founder Dustin Moskovitz sold right after the expiration of the so-called lock-up period for their shares, the period in which company insiders are barred from selling their shares.

Aaron Kessler of Raymond James said the fact that Zuckerberg says he isn't going to sell now counteracts the negative vibe over other employees being able to sell a bit earlier than they were previously, USA Today reported.

Also in the regulatory filing was a disclosure that the company is allowing Facebook staffers who previously weren't free to sell their shares until Nov. 14 to dump their stock as early as Oct. 29. This means another 234 million shares will be available to be sold on Oct. 29.

Companies with a record like Facebook — having lost about 50 percent of its value in the span of a few months — often attract investors who buy stocks that they believe have been beaten into the value zone but are set to rise.

“You don't necessarily want to jump in while the stocks are falling,” Kessler told USA Today, adding that investors should be looking to see where the bottom is.

Other analysts caution investors against the plunge due to the sheer nature of what Facebook is — a social media company.

“None of the companies have yet to prove that they can be profitable long term, especially when it comes to mobile related revenue,” Cyrus Mewawalla of CM Research said.

To find social media stocks attractive requires “creative” analysis, according to Mewawalla.

“It [the stock] is not at a bottom right now,” Todd Schoenberger, managing principal of The BlackBay Group, told Yahoo. “You’re going to have some suckers that get into this stock.

“When it gets down to single digits, that will be your entry point,” he added.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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