Facebook Fires Employee On Insider Trading Allegations

 
Facebook allegedly terminated an employee over allegations that he bought the company’s stock on the secondary market.

Michael Brown, manager of Corporate Development at Facebook, bought the shares back in September 2010, according to a report from TechCrunch.


A source told TechCrunch that Brown was terminated for violating Facebook’s policy that prohibits buying and selling of Facebook shares on secondary exchanges.

Such secondary exchanges offer investors a chance to buy and sell tough-to-trade assets like those of private companies like Facebook. Investors are buying up such shares through through companies like SecondMarket.

The sellers of privately held shares are usually former employees or early investors who are looking to cash out. And, of course, there are plenty of other investors eager to take those shares off their hands.
(Check out my colleague’s Steven Bertoni piece on SecondMarket creator Barry Silbert in the June 7 issue of Forbes where he notes that connecting buyers and sellers in the shares of privately-held tech companies was the company’s fastest-growing market.)
The secondary trading arena is getting extra attention these days in light of the SEC’s recent interest. In December, there were reports that the SEC was asking Facebook, Twitter, LinkedIn and Zynga for information related to trading activity of its private shares.
Facebook’s shares are particularly hot these days for obvious reasons including Goldman’s investment in the social networking company. Goldman Sachs investment in Facebook valued the company at roughly $50 billion. The firm invested $450 million of its own money and was planning to offer Facebook shares to high net-worth individuals investors

It’s been a bit of a bumpy ride since that news broke. There have been perceived conflicts of interest and regulatory concerns.

Right off the bat, Goldman feared that it’s deal with Mark Zuckerberg’s company was becoming too public. Regulators prohibit private offerings from being publicly  promoted and Goldman was nervous that all the hype around its Facebook offering would be questioned by the SEC.

As a result of that and other concerns, Goldman pulled the offer away from U.S. investors and offered it instead to foreign investors only who are not subject to the same restrictions.

So, if the allegations about Brown buying and selling trades on the secondary market are true, then it will come as no surprise that Facebook fired him for it.

The TechCrunch story says Brown bought the shares back in September-that’s before the Goldman deal was announced. That may not matter if Facebook’s ban on trading secondary-market shares was in already in effect.

Regardless, the last thing Goldman and Facebook need before a potential IPO are their own insiders’ drawing more negative attention to the deal.

Ford Folks Shuffles Riches

By FESTUS UR
4 April, 2011

Picture: William Clay Ford Sr.
The headline out of Ford Motor’s annual proxy statement, released Friday afternoon, is no doubt that the company paid chief executive Alan Mulally and executive chairman William C. Ford Jr. each $26.5 million in 2010.

That’s in addition to the big stock payouts Ford made to the two men last month as a reward for the automaker’s turnaround — $56.5 million in Ford shares for Mulally and $42.4 million for Bill Ford Jr.
Just as interesting, though, is the fact that elder members of the Ford family appear to be reducing their personal stakes in the company by selling or giving shares to other family members.

The Ford family owns less than 2% of the company’s shares, but controls 40% of the voting power through a special class of stock. There are 71 million Class B shares, about three-fourths of which are held in a voting trust. The rest are held by individual family members. The family has a pact that Class B shares put up for sale will first be offered to other family members.

It would appear that’s what has happened recently. Patriarch William Clay Ford, the last surviving grandchild of Henry Ford, owned 9.5 million Class B shares, or 13.3% of the total, as of Feb. 1, 2010. But a year later, his stake is down to 6.7 million shares, or 9.5%. Bill Ford Sr.’s current stake, including an estimated 26.3 million common shares, is worth about $500 million.

Meanwhile, his son Bill Ford Jr., the company’s executive chairman, has increased his Class B holdings to 6.9%, from 5.8% a year ago. (He also owns 14.7 million common shares)
The largest owner of Class B stock is Lynn Alandt, a cousin of Bill Ford Jr., who owns 7.4 million shares, or 10.5% of outstanding Class B shares.

Also divesting Class B shares in the past year is another cousin, Eleanor Ford Sullivan, who reduced her Class B holdings to 3.6 million shares, or 5.1%, from 7.9% a year ago.

Some Class B shares are going to various trusts, perhaps for younger generations, according to the proxy. Trustee David Hempstead, a Ford family attorney, now controls 7.3 million shares, or 10.3% of the Class B shares, up from 8.64% a year ago.

Hempstead was not available for comment, and a Ford Motor spokesman did not immediately return a phone call.