Tuesday, August 28, 2012

Facebook Is Setting Off Tons Of Corporate Governance Red Flags



According to BusinessInsider on August 20, 2012, an SEC Form 4 form was released for Facebook founding investor and board member Peter Thiel, showing 20 million shares sold for a profit of nearly $400 million. Since May 22, 2012, total company stock sales for the Facebook director have eclipsed $1 billion.

Raising eyebrows, the venture capitalist dumped 80 percent of his remaining shares, essentially cashing out shortly after the required trading lock-down for investors was lifted. At GMI Ratings, we’ve rated the company a solid “D” since its IPO. This divesture news has Facebook on watch as a company likely to join the five percent of companies we rate “F”. To those who have been paying attention since the beginning, the company’s poor governance has been an unmistakable warning sign for investors to take heed, and a clear opportunity to avoid the resulting massive destruction in share price.

If a founder and board member is concerned enough to dump the vast majority of his shares, count us as equally concerned….

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