- Last Updated: 11:20 AM, May 24, 2012
- Posted: 12:43 AM, May 24, 2012
Facebook’s outside investors aren’t the only ones feeling cheated.
In Silicon Valley, where tech workers are lured with piles of stock and promises of instant riches, the social network’s employees are sitting on sinking shares that they can’t cash in for several months.
Since Facebook sold shares to the public at $38 a pop last Friday, the average employee has lost an estimated $844,000, based on yesterday’s closing price of $32. Shares rose 3.2 percent yesterday, their first daily gain.
“It’s obviously disappointing for Facebook’s employees who still need to work there, engineering the site and selling ads,” said Sam Hamadeh, the head of research firm PrivCo, who estimated the losses in employees’ stock. “These distractions must be affecting them.”
Facebook’s cool-company status is in jeopardy if the stock-price erosion continues, sapping the super-sized growth that attracted workers in the first place, recruiters said.
The stakes of losing that status couldn’t be higher in Silicon Valley, where other tech titans compete for talented engineers. In contrast, Google and Apple have seen their shares soar, rewarding employees who stuck with them.
“At Google, you count on that money every year because the stock has been relatively stable and growing,” said Robert Greene, the head of GreeneSearch, a tech recruiting firm. “At Apple, you count on that money. At Facebook, we don’t know yet.”
One recruiter pointed to Zynga as a place where employees are losing faith along with the share price. Zynga closed at $7.07 yesterday after the social-gaming company went public at $10 in December. Insiders traded shares on private markets as high as $17 last year.
One consolation for Facebook employees is that most have stock awards instead of options. Since 2007, Facebook has given out restricted stock units that won’t be “underwater” if the stock falls below a certain price.
Those units have only lost value in the company’s first day as a public company, going from about a $20 billion prize pool to $16.5 billion, according to PrivCo’s Hamadeh.
Meanwhile, employees are resigned to a wait-and-see approach until their lockup ends and they can sell their shares. The first lockup for insiders expires after 91 days.
“They need to be focused on what you believe the price will be when you’re eligible to sell shares. That’s the only price that matters,” said Kevin Rosenberg, managing partner at recruiting firm BridgeGate.
Still, the bad headlines from the botched IPO continue to weigh on the company. Facebook shareholders yesterday sued the company and its bankers, accusing them of failing to disclose slowing revenue growth before the stock launch.