Zuckerberg 'Sold More Stock Than Usual', Faces Lawsuit From Angry Investors (cnbc.com) 87
"Facebook executives said on Wednesday its profit margins would plummet for several years due to the cost of improving privacy safeguards and slowing usage in its top advertising markets," reports Reuters, adding that the news "wiped over $120 billion off the company's share price." One millennial options trader lost $180,000 overnight.
And meanwhile CNBC reports that Facebook insiders "sold more stock than usual in the second quarter," the vast majority sold by Mark Zuckerberg, leaving some experts with mixed opinions. To be clear, insiders sold in compliance with what's known as Securities and Exchange Commission Rule 10b5-1, a preapproved selling mechanism that is completely legal. And there is no evidence to suggest they were acting on inside information about the disastrous quarter that sent Facebook's stock down nearly 20 percent Thursday. However, their timing happened to be pretty good....
"You have something that's an outlier here," said James Cox, professor at Duke University School of Law. "It happened to be a very bad quarter that they had -- it doesn't wear well."
Friday Facebook and Mark Zuckerberg were sued "in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about $120 billion of shareholder wealth." The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users.
Kacouris said the marketplace was "shocked" when "the truth" began to emerge on Wednesday from the Menlo Park, California-based company. He said the 19 percent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants. The lawsuit seeks class-action status and unspecified damages. A Facebook spokeswoman declined to comment.
And meanwhile CNBC reports that Facebook insiders "sold more stock than usual in the second quarter," the vast majority sold by Mark Zuckerberg, leaving some experts with mixed opinions. To be clear, insiders sold in compliance with what's known as Securities and Exchange Commission Rule 10b5-1, a preapproved selling mechanism that is completely legal. And there is no evidence to suggest they were acting on inside information about the disastrous quarter that sent Facebook's stock down nearly 20 percent Thursday. However, their timing happened to be pretty good....
"You have something that's an outlier here," said James Cox, professor at Duke University School of Law. "It happened to be a very bad quarter that they had -- it doesn't wear well."
Friday Facebook and Mark Zuckerberg were sued "in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about $120 billion of shareholder wealth." The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users.
Kacouris said the marketplace was "shocked" when "the truth" began to emerge on Wednesday from the Menlo Park, California-based company. He said the 19 percent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants. The lawsuit seeks class-action status and unspecified damages. A Facebook spokeswoman declined to comment.
Well no shit. (Score:5, Insightful)
It's almost like access to all the metrics and paying attention to the fact that he was going to have to go in front of fucking Congress was obviously going to see a stock drop relatively soon. To be frank, anyone who had stock in Facebook should have sold in and then shorted a bunch more the day after his Congressional testimony.
Re: Well no shit. (Score:4, Insightful)
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This is unlikely to happen though. The stock was overpriced due to stockholder exuberance, not because Zuckerberg was lying.
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No but it should. All the conditions that made it obvious the stock was going to drop were his fault.
It's not insider trading because the conditions made it obvious that the stock was going to drop.
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Re: Well no shit. (Score:2)
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Thank you for your 20/20 hindsight. I will make sure not to let this information go to waste once my time machine is finished.
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20/20 hindsight? Are you a moron? No question it was going down, the only question was how much.
Why even slashdot had been commenting on how FB was bombing phones lately in an attempt to get people back. I tuned all my notifications OFF! It was always going off.
This one was as sure as death and taxes.
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I've notice a bunch of annoying FB ads recently while watching Youtube.
* Google sells ads to Facebook for money.
* People sign up, and pay for, the commercial-free version of Youtube after being annoyed by Facebook ads
Win-win for Google/Youtube; they make money coming and going.
Re:Well no shit. (Score:4, Insightful)
Correct.
And the article summary is ridiculous:
"However, their timing happened to be pretty good...."
HINT (1): Rule 10b5-1; the stock trade is pre-planned to happen on a scheduled date, TYPICALLY at the end of a quarter.
HINT (2): Quarterly results are announced on a scheduled date.
Just because two announcements come close together doesn't mean there was any timing applied. The overblown Privacy fiasco has been happening in the FULL PUBLIC VIEW. *cough*
Grounds for lawsuit = NONE.
Markets are markets.
What are these snowflake millennials gonna do when there's a SERIOUS correction? Stage a protest? Sue their broker?
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The mail room had enough inside information to know what was coming, zuckerberg certainly did.
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Pshaw, to think the stock market might actually go down
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[...] doesn't mean there was any timing applied. The overblown Privacy fiasco has been happening in the FULL PUBLIC VIEW. *cough*
Actually, there was timing applied. After the privacy fiasco, anyone with a bit of common sense should have seen this stock plunge coming. During this last quarter.
Grounds for lawsuit = NONE.
Exactly: by waiting a bit, any grounds for a lawsuit that might have existed are gone now.
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To be frank, anyone who had stock in Facebook should have sold in and then shorted a bunch more the day after his Congressional testimony.
I didn't know that Zuckerberg had any Facebook anymore. I thought he told us a while back that he gave it all away to charity, while his Karma was still great, and he was considering to run for President of the US.
. . . or maybe that was just some fake news that Russians posted on Facebook . . .
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And all this is happening just in time for Facebook's new Dislike button.
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I don't agree at all. I mean, I don't agree that anybody should have listened to your future advice, in the past, to time the change in price of a security.
I think "stocks go up, stocks go down". Like, who the fuck doesn't know this?? Apparently, people who buy securities are capable of doing so without realizing the values can go down.
I would never advise anyone to buy a stock. Occasionally I will advise "NOT" to buy a stock... because I figure if someone really wants to do it my advice won't affect them a
Re: Read that as (Score:2)
Say what? (Score:4, Funny)
One millennial options trader lost $180,000 overnight.
Is facebook stock the millennial options trader's safe space now?
He Posted About It (On Facebook) (Score:5, Informative)
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It's also bizarre enough that you can sue companies for not fulfilling your personal expectations.
They aren't. They are suing him for making misleading statements to the market and failure to disclose market pertinent information not for "not fulfilling personal expectations"
10b5-1 means sale was arranged months in advance (Score:5, Informative)
The reference to rule 10b5-1 means the stock sales were arranged months in advance. Such arrangements do "not permit the person to exercise any subsequent influence over how, when, or whether to effect purchases or sales". [Quoting 10b5-1]
This is to ensure a) they aren't selling bases on some recent news that hasn't become public and b) plans of significant stock sales by executives serve as a warning to other investors, so the public can choose to sell their stock BEFORE the executives sell theirs, if they wish to do so.
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Does this scheme permit you to cancel the stock sale when the time comes? Otherwise, if I was a CEO, I'd be arranging a sale on each quarter and only exercise the ones where I knew the end of quarter report would be bad.
Started to mention, that means not cancelable (Score:3)
"no influence over whether the sale occurs" means not cancelable. Insiders can go to prison for buying or selling stock in a way that they could cancel it.
> Otherwise, if I was a CEO, I'd be arranging a sale on each quarter and only exercise the ones where I knew the end of quarter report would be bad.
That would put you in prison.
However, a court case added a new wrinkle and some nuance to that. Rule 10b5-1 is part of the SEC implementation of a law (statute) that says it's illegal to buy or sell a secur
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Quite thorough answer, thanks!
"Shocked"??? (Score:1)
How could anyone who has seen the news for the past several months be "shocked" that FB is in hot water?
Gotta love publicly traded companies (Score:3)
So the great thing about taking your company public is that you get to deal with members of the public owning your company.
I feel like any smart investor would have seen Zuckerberg being dragged up in front of congress and known that big changes were afoot for the de facto leader of social media.
So what's the basis for the lawsuit - facebook leadership didn't disclose they were in trouble? They just did disclose they're in trouble, that's why the stock price crashed and why you're angry. Hope the investor has some good evidence for the court because this suit seems frivolous.
Excuse my Schadenfreude (Score:5, Funny)
That bit really made my day.
Re:Excuse my Schadenfreude (Score:4, Informative)
Let's see, he lost $180K, and FB went down 19% that one day, which would imply just under a million dollars or so in options trading.
Sorry, when you're dealing with those numbers ( and it's options, not real stock), it's somewhat hard to feel sorry anymore. Especially since if you read up on the guy and his celebrations of $300K in gains. $180K is a lot, but if you're doing that level of OPTIONS trading, you're probably fairly well taken care of and that $180k might just mean you skip today's Bentley purchase. (The people who do those sort of trades are either institutional, or already multimillionaire rich).
It's like people who complain a tax increase will cost them $50,000 more (happened). Turns out if you do that calculation, the guy was already doing about $2M in income so while the numbers are impressive, the real meaning behind them is hidden.
And yes, it always helps to do that calculation. Next time someone claims big numbers, find out what that tax increase actually means and you'll probably find out they're not going to be hurting quite so much.
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Let's see, he lost $180K, and FB went down 19% that one day, which would imply just under a million dollars or so in options trading.
That's not how options work. Most likely he lost everything and hence probably had $180k invested, options are a high risk strategy, they pay off big when your right but you lose everything when your wrong.
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It's why it should be called gambling.
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There are various option trading strategies to make money and limit your loses.
For example:
https://www.investopedia.com/t... [investopedia.com]
"A straddle is an options strategy in which the investor holds a position in both a call and put with the same strike price and expiration date, paying both premiums. This strategy allows the investor to make a profit regardless of whether the price of the security goes up or down, assuming the change in the underlying stock price is significant enough to move past either of the stri
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Then you lose the premium you paid for the options - not a huge amount. Hopefully some of your other strategies pay off.
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Are you talking about broker markets, or ETOs? Broker markets are a ripoff because they can price things however they like. ETOs are a lot more reasonably priced because you've got all the HFTs quoting them tight using Black-Scholes etc. for pricing. ATM options aren't worthless, but they're basically a premium for volatility. It's a small amount compared to the stock price, unless it's a very volatile stock.
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But... but... but... (Score:3)
..."You have something that's an outlier here," said James Cox, professor at Duke University School of Law. "It happened to be a very bad quarter that they had -- it doesn't wear well." ...
Mr. Zuckerberg had always seemed to be such an upstanding, honorable person.
It's the tax cuts (Score:2)
Mark Zuckerberg is a Criminal (Score:2)
Mark Zuckerberg is a criminal, a traitor who sold out America to Russian Oligarchs who paid Facebook in RUBLES for chrissakes. He helped the Russians to interfere in the 2016 elections and as soon as DJT "won", he went out of his way to act like Facebook did not know what was going on. Zuckerberg lied about Facebook's influence, when the platform was designed and refined to influence humans. I've quit and I'm not going back. Screw that asshole.
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> The funny part here is Edge feed is based on your browsing habits,
> sites and content you access. if you are seeing that sort of shit it means
> that is the sort of shit you access yourself. I don't get any such sets of links.
Just lucky. Yes legitimate sites do have malvertising, via legitimate ad brokers as this Register article explains https://www.theregister.co.uk/... [theregister.co.uk]
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Options trading = gambling (Score:2)
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Forgive me if I have zero sympathy for an OPTIONS trader.
Options trading is GAMBLING.
Cry me a river...
My thoughts exactly.