Why should Facebook’s board members wait to sell their shares?

The decision by early Facebook investor Peter Thiel to unload the vast bulk of his shares in the massive social network was explained easily enough. It had simply awlays been his intention to sell the shares as soon as the company went public. Nonetheless it had a number of people scratching their heads.

One such person was The Atlantic Wire‘s Dashiell Bennett:

While no one is questioning Thiel’s right to take back what he earned, some people are still wondering why a board member would choose to essentially exit the company (financially, at least) so soon after going public. And before regular employees will get the same option. Their shares are “locked up” until at least at October.

…

It feels to some like a vote of no confidence from someone who played such a key role in the building of the company and now looks ready to move on to other things.

First of all, board members are rarely significant shareholders in the company on which they serve, they are usually brought in from other, non-competing companies, to provide advice and experience to senior management.

And as for the poor employees, well they are the last of the lockups because they took the lowest risk (and received a good salary) compared with the early investors.

Thiel’s share sale is best explained as the reasonable actions of a VC. The share overhang, following the IPO, is massive. The number of locked up shares represent about three more Facebook IPOs coming onto the market over the course of this year. It’s a good reason to pull money off the table ahead of others doing the same later on.

To some extent, it could be said that Facebook’s [$FB] share price has held up reasonably well, given the giant waves of shares that periodically become unlocked and come crashing/cashing-in to the market.

However, the sale of Thiel’s shares might very well signal that Facebook is looking for a new set of board members. Companies need different sets of skills at different stages of their lives.

Thiel was useful when the company was small and growing fast, today it’s very much a different company and needs board members that can help it through that tricky post-IPO phase and into a more mature and stable configuration.