Yesterday, only hours prior to Facebook (FB) releasing a disastrous 2Q 2018 earnings report, its Founder/CEO Mark Zuckerberg sold $52 million worth of shares. Today, FB declined by 19% and lost $120 BILLION in market cap. This was FB's largest single day decline in history and the largest single day market cap loss for any stock in history!
According to the NASDAQ's web site, 29 analysts covered FB shares prior to today and 25 of them rated FB a strong buy with 3 more rating FB a buy. Only 1 analyst was courageous enough to say that FB shares should merely be held. NOT A SINGLE analyst rated FB a sell or strong sell!
At yesterday's closing price, FB was up by 25% since its 1Q 2018 earnings results were released on April 25, 2018. During this 90 day period, FB achieved more than double the gains of the NASDAQ Composite. FB shares got pumped up to artificially high levels by the mainstream financial media, allowing Zuckerberg to dump billions of dollars worth of stock prior to disclosing the truth to investors about their rapidly deteriorating financial situation - with FB's operating expenses now growing much faster than revenue!
During yesterday's trading day as Zuckerberg dumped $52 MILLION worth of his FB shares prior to the release of 2Q 2018 earnings results, Marketwatch published an article with the headline, "Facebook earnings: Amid controversy, finances appear bulletproof." According to the article, investors had no reason to be concerned about the recent onslaught of regulatory issues in both the U.S. and Europe. The article reassured investors by saying, "the last word from Chief Executive Mark Zuckerberg was that the myriad issues have not yet impacted the top line nor the company’s longer-term prospects."
In fact, last month after Europe implemented the General Data Protection Regulation (GDPR) that many investors feared would harm Facebook's European business, FB analysts declared GDPR to be nothing but FUD and promised investors that FB would actually benefit from GDPR and profit more because of it. This turned out to be false and misleading with FB's Daily Active Users in Europe declining last quarter for the first time in history!
Together with FB's legal compliance costs exploding, the company's free cash flow in 2Q 2018 declined by 43.78% on a quarter-over-quarter basis while also falling by 27.48% on a year-over-year basis. This was FB's largest year-over-year quarterly free cash flow decline in history!
Prior to today, Zuckerberg during the trailing 90 day period sold a shocking $2.8 BILLION worth of shares, by far his most aggressive insider selling in history. In comparison, Zuckerberg's median quarterly stock sales over the last two years have been only $266.25 million. Knowing full well that the company would have a major earnings miss, Zuckerberg sold 10 1/2 times more shares than normal!
Over the last twelve months, FB by far has seen more insider selling than any other publicly traded company on earth. All together, FB insiders have dumped $6.75 BILLION worth of shares, more than double #2 ranked GoDaddy, which had $2.89 BILLION in insider selling. FB has experienced 30X more insider selling than fellow FANG stock Alphabet/Google (GOOG), which was ranked #31 with only $224.48 million worth of insider sales! FB has experienced 41X more insider selling than fellow FANG stock Apple (AAPL), which was ranked #42 with only $161.98 million worth of insider sales!