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Zuckerberg 'Sold More Stock Than Usual', Faces Lawsuit From Angry Investors (cnbc.com) 87

Posted by EditorDavid from the speaking-of-downvoting dept.
"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.
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Zuckerberg 'Sold More Stock Than Usual', Faces Lawsuit From Angry Investors More

Zuckerberg 'Sold More Stock Than Usual', Faces Lawsuit From Angry Investors

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  • Well no shit. (Score:5, Insightful)

    by ravenshrike ( 808508 ) on Sunday July 29, 2018 @02:37AM (#57026572)

    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)

      by phantomfive ( 622387 ) on Sunday July 29, 2018 @02:44AM (#57026582) Journal
      Mark Zuckerburg (who thinks his users are idiots for trusting him) doesn't sell stock. He tells his accountants and lawyers to sell it, who come up with, and document, all the appropriate justifications to make the sale legal under the letter of the law. This lawsuit is not likely to go anywhere.
      • No but it should. All the conditions that made it obvious the stock was going to drop were his fault.

        • 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.

        • Undoing moderation. Sorry.

    • Re: (Score:1)

      by Anonymous Coward

      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.

      • Re: (Score:1)

        by ebvwfbw ( 864834 )

        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.

        • 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)

      by mysidia ( 191772 ) on Sunday July 29, 2018 @04:45AM (#57026820)

      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?

      • Right because with absolute inside information he was obvious to what was coming... a situation he was completely to blame for.

        The mail room had enough inside information to know what was coming, zuckerberg certainly did.
      • UP! UP, it's always supposed to go UP. You told me so when you sold me that crushed snake! I'm going to sue to make it right for me.

        Pshaw, to think the stock market might actually go down ... inconceivable! [knowyourmeme.com]

      • Re: (Score:2)

        by Okind ( 556066 )

        [...] 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.

    • 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 . . .

    • And GDPR in Europe didn't even kick in yet...

    • And all this is happening just in time for Facebook's new Dislike button.

    • 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

  • Say what? (Score:4, Funny)

    by Anonymous Coward on Sunday July 29, 2018 @03:01AM (#57026616)

    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)

    by PseudoAnon ( 5437498 ) on Sunday July 29, 2018 @03:17AM (#57026640)
    I don't know about Zuckerburg selling more shares than usual/expected, but the earnings call shouldn't have been so much of a surprise. He made multiple announcements about their plans weeks before the earnings call. He mentioned how many people they were hiring and that their actions to secure and improve the platform would significantly affect profits. Saying that this came out of nowhere is nonsense.

  • 10b5-1 means sale was arranged months in advance (Score:5, Informative)

    by raymorris ( 2726007 ) on Sunday July 29, 2018 @03:23AM (#57026648) Journal

    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.

    • Re: (Score:2)

      by Ecuador ( 740021 )

      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.

      • "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

  • "Shocked"??? (Score:1)

    by Anonymous Coward

    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)

    by mewsenews ( 251487 ) on Sunday July 29, 2018 @03:50AM (#57026696) Homepage

    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)

    by SigmundFloyd ( 994648 ) on Sunday July 29, 2018 @04:27AM (#57026772)

    One millennial options trader lost $180,000 overnight

    That bit really made my day.

    • Re:Excuse my Schadenfreude (Score:4, Informative)

      by tlhIngan ( 30335 ) <slashdot@worf.ERDOSnet minus math_god> on Sunday July 29, 2018 @05:44AM (#57026966)

      One millennial options trader lost $180,000 overnight

      That bit really made my day.

      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.

      • Re: (Score:1)

        by Anonymous Coward

        One millennial options trader lost $180,000 overnight

        That bit really made my day.

        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.

        • Re: (Score:3)

          by swilver ( 617741 )

          It's why it should be called gambling.

        • 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

          • Yes there are, but given the drop and his losses he obviously isn't doing straddles. Even with a straddle it is the equivalent of betting on black and red, occasionally it will come up green, a straddle is by no means a guarantee.
        • You're right that's not how options work. But according to the linked article, they quote the guy and he said he put about 40% of his account into those options, so he didn't lose everything.
      • Depends how leveraged he was. If he was playing with his own money, then yeah a $180k loss probably isn't a big deal. But if he was leveraged 10:1 (he put up $100,000 of his own money to borrow $1 million to play in the market), then the $180k loss is huge.
        • firstly it is options trading so most likely it was $180k invested not a million. secondly most banks have learnt their lesson, options trading is not like margin lending, they generally do not allow large leverages if any at all (my bank for instance requires all positions to be fully covered), you usually have to have either shares or cash or cash equivalents that can cover any losses.
      • Comment removed based on user account deletion

  • But... but... but... (Score:3)

    by QuietLagoon ( 813062 ) on Sunday July 29, 2018 @07:46AM (#57027380)

    ..."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.

  • Following the Trump corporate tax cuts CEOs used stock buy backs to turn the tax cuts into case in their pockets. We pay CEOs in stock so they can dodge income tax. The only reason this is an issue is nobody wants to admit out loud that none of the tax cut money went to jobs or wages.

  • 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.

    • Comment removed based on user account deletion
  • Forgive me if I have zero sympathy for an OPTIONS trader. Options trading is GAMBLING. Cry me a river...

    • Re: (Score:1)

      by ebvwfbw ( 864834 )

      Forgive me if I have zero sympathy for an OPTIONS trader.

      Options trading is GAMBLING.

      Cry me a river...

      My thoughts exactly.

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