Bosses at Facebook sold off falling shares
FACEBOOK boss Mark Zuckerberg sold millions of pounds of shares in the weeks before the firm’s value plunged after disappointing financial results.
Panicked traders wiped £93billion off the value of the business this week, with shares falling 19 per cent in response to faltering growth in user numbers.
It cut the value of Mr Zuckerberg’s stake in Facebook by £12billlion, but the damage could have been even worse.
In the three months to June 30, the company’s chief executive, pictured, sold 13million shares worth more than £1billion – twice the amount he sold in the previous quarter, and ten times more than in the final three months of 2017.
He carried on selling this month, according to data from the tracking website Insiderscore seen by CNBC.
Mr Zuckerberg – who three years ago pledged to sell 99 per cent of his stake to support charities – got rid of 240,000 shares during the trading day before Facebook released the update that sent shares sliding. He had sold 524,000 shares a day earlier.
Last week, other top sellers included the company’s chief operating officer Sheryl Sandberg, who offloaded £8.8milllion of shares, chief product officer Christopher Cox (£1.5milllion) and legal chief Colin Stretch (£120,000). All of this was done legally and disclosed to the stock market.
It is illegal for directors to use secret information about upcoming results to trade stock as it gives them an unfair advantage.
US stock market rules allow company bosses to set up a trading plan to sell shares at regular intervals in a way that does not break the rules. Decisions on when to sell up are made independently of the directors.
John Coffee, professor of law and director of the Centre on Corporate Governance at Columbia Law School, suggested that the latest sale makes little difference to multi-billionaire Mr Zuckerberg given the vast size of his fortune.
He said trying to get around the rules would not be worth the legal risks involved, especially since most of the cash is going to charity.
But James Cox, professor at Duke University School of Law, said: ‘People with good lawyers – and I presume Facebook executives can afford good lawyers – do a good job of gaming the [regulations].’
It comes after Facebook shareholder Trillium Asset Management called for Mr Zuckerberg, 34, to go after a brutal few months for the firm.
Facebook is at the centre of a backlash against tech giants after a scandal in which millions of users’ details were passed to the political consultancy Cambridge Analytica.
Facebook is ploughing huge sums of money into site security in an effort to improve its image. Its user base in Europe fell from 282million to 279million in the wake of the Cambridge Analytica scandal.
Trillium said Mr Zuckerberg’s role as both chairman and chief executive means the company’s board is unable to keep him in check.
It added: ‘We believe this lack of independent board chair and oversight has led to Facebook missing or mishandling a number of severe controversies, increasing risk exposure and costs to shareholders.’