Marc Andreessen, the venture capitalist who brought the Web to the world when he created Mosaic and Netscape, sold a third of his fund's holdings in Facebook. Is now the time to get out?
A fund back by one of the founding fathers of the Worldwide Web, is selling one-third of its stake in Facebook. Andreessen Horowitz, the well-respected venture capitalist firm run by 42 year-old Marc Andreessen, is selling one-third of its stake in Facebook, according to filings from the SEC. Andreessen is a Facebook director.
Andreessen Horowitz sold 2.28 million shares of the social networking giant last week for about $111 million. The fund still has 4.57 million shares of Facebook worth about $215 million.
Andreessen is no ordinary West Coast investor. He led the team that created Mosaic, the first successful web browser that introduced the laymen to the Internet. He later went on to start Netscape, the software web company that ushered in the tech gold rush at the end of the last millennium when it went public in 1995.
To be sure, Andreessen isn't crying about the stock's recent performance; Facebook has had a great year so far. Since the start of 2013, the company's shares are up about 77%. The stock is now trading 24% higher than its May 2012 IPO price.
But should investors sell even some of their Facebook shares because Andreessen has done so?
"I think in this case, yes," says Steve Cortes, founder of Veracruz TJM. "Andreessen is smart money. I'm not saying you should always copy what you read in the paper that smart money is doing but, in this case. I think you should."
"My main problem with Facebook is you're paying an extremely rich valuation – over 100 times present earnings, about 40 times forward earnings," says Cortes. "In social media, the key demographic is young people. And, there is ever mounting evidence that young people are turning away from Facebook. It has lost its cool."
The technicals do not bode well for Facebook at this time, either, according to Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson. Besides breaking below key technical levels, Ross notes who else is selling out of their positions at this time.
"It's not just Andreessen Horowitz getting out of the name but also Morgan Stanley who was the lead manager on this deal last year," says Ross. "They lowered their rating on the entire Internet sector to 'inline', I assume from 'outperform'. So, that's another caution stance there. I would be a seller, but I do like it as a core holding longer-term. I just don't like it here."
To see the rest of the analyses by Cortes on the fundamentals and Ross on the technicals on Facebook, watch the video above.
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