Facebook (FB) shares staged a half-hearted rally Wednesday morning on news that the company has cancelled plans to sell 101 million shares in order to pay a $2 billion tax bill — a move that is being interpreted by some as equivalent to a buyback. In the same filing, FB announced that it would unlock one billion shares for insiders to sell earlier than expected and that CEO Mark Zuckerberg would not sell any more shares for at least one year.
Fundamentally the news was neutral for the stock, at best. Facebook isn't actually buying back shares, and the accelerated end of the lock-up shows insiders are clearly champing at the bit to dump shares ASAP. Zuckerberg sold more than $1 billion of shares at the IPO price; vowing not to sell more for 12 months is literally the least he can do for shareholders. Facebook acknowledged the existence of shareholders last night. It's a step up for the company but not a bullish thesis.
Todd Schoenberger, managing principal of The BlackBay Group dismisses today's buyers as "suckers." Schoenberger says FB's 5% growth in unique users and its non-existent plan for monetizing mobile trump any fuzzy ideas about the stock making a bottom here. As for the plan to unlock shares early, it's just more evidence that "insiders know this is the best they're going to get."
If the market as a whole is a casino, where the odds are stacked in favor of the house, then Facebook shares have been a game of Three-Card Monte, where it's literally impossible to win. Someday that may change, but determining the exact moment when that happens is anyone's guess. Until the fundamentals change, Schoenberger says, "It's not worth the risk. Stay away from it."