Facebook Is Setting Off Tons Of Corporate Governance Red Flags

http://www.businessinsider.com/gmi-ratings-alert-facebook-inc-2012-8

Facebook Inc. founder Peter Thiel cashes out with $1 billion. Stakeholders have to ask, is this someone you really want on the board?

Raising eyebrows, the venture capitalist dumped 80 percent of his remaining shares, essentially cashing out shortly after the required trading lock-down for investors was lifted. At GMI Ratings, we’ve rated the company a solid “D” since its IPO. This divesture news has Facebook on watch as a company likely to join the five percent of companies we rate “F”. To those who have been paying attention since the beginning, the company’s poor governance has been an unmistakable warning sign for investors to take heed, and a clear opportunity to avoid the resulting massive destruction in share price.

If a founder and board member is concerned enough to dump the vast majority of his shares, count us as equally concerned. More, the graphic below displays insider sales since selling restrictions were lifted. Not only have early investors been selling shares since the spring but Mark Zuckerberg himself sold more than $1 billion in shares in May when the stock was worth $37.58.