Often, when an insider or CEO of a public firm makes an open market purchase of company stock, it’s considered a vote of confidence, especially if there is controversy in the company, a tanking stock, large PR problem, or continual quarterly losses. When directors of the company do the same, it’s also a vote-with-two-feet indication of their belief. In many instances, directors of public firms are expected to own equity in the firm upon coming on board, as a sign of commitment.
Reed Hastings, CEO of Netflix Inc. and a Facebook Inc. board member, disclosed on Thursday that he purchased approximately $1 million in Facebook stock. In a filing with the U.S. Securities and Exchange Commission, Mr. Hastings disclosed buying 47,846 Facebook Class A shares. His weighted average price was $21.03 each.
The same day, Facebook’s stock closed trading at $20.72. The social media firm’s IPO price in May was $38.00 valuing the company at $1 billion. At the $21.00 price, the valuation is approximately $59 billion.
Many large investment funds and individual investors may be looking at Facebook’s stock as a straight out buying opportunity, since it has tumbled so far off of its IPO value, and a reasonable rise of its stock may be in order as its business model emerges. Others may have a strong belief in the company’s core product and advertising revenue opportunity, and expect that revenue and profit to grow, driving upwards its stock price.
It is not clear which of those two camps Mr. Hastings may be in, or whether he is in both.Pages: