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August 21, 2012

Early Facebook investor Peter Thiel dumps stock

PayPal co-founder made $1bn on $500k investment

By Steve Evans

Peter Thiel, one of Facebook’s earliest investors, has sold the vast majority of his stake, making a huge profit from the social network’s IPO.

Thiel, the billionaire co-founder of PayPal, cashed in just over 20 million shares when Facebook’s lockup period ended, pulling in nearly $400m.

When Facebook initially floated on the stock market, Thiel sold over $600m worth of shares, meaning he has made around $1bn from his original investment, thought to be around $500,000 for a 10% stake in the company way back in 2004.

He still retains around 7 million shares.

Facebook’s shares have been on a steady downward spiral since its vastly-overinflated IPO launch back in May. From an IPO price of $38 per share, the stock immediately hit $45 as trading began but have fallen since then, languishing around $18 – $20 at the moment.

The latest dip has been caused by the end of the lockup period, which prohibits employees and early investors from selling their stock.

It is thought Facebook’s stock will continue to fall over the next few months as further lockup periods expire and more shares are sold.

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The worry for Facebook is how it will make money. It has more than 900 million members, with around 500 million of those accessing the social network via mobile each month. However, while Facebook is doing relatively well at monetising its desktop website, it has utterly failed to transition that success over to mobile. It is only now getting a grip on advertising and other revenue-generating features for its mobile site and apps.

Until Facebook can prove it can make money from the mobile space it is likely the share price will continue to struggle.


More on Facebook’s IPO and the tech market bubble:

Tech bubble: Keep calm and dot com

Is the Facebook IPO actually worth the investment?

Facebook runs out of friends

Death of the social media IPO?

Mo’ Money, Mo’-bile (advertising) problems

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