Wednesday, May 9, 2012

Signs of insider trading in Facebook?

GSV Capital Corp (ticker symbol GSVC) has been an indirect way for investors to get exposure to Facebook. It's a closed-end management investment company that "invests through private secondary market transactions, direct investments in its portfolio companies, and through transactions executed on public securities exchanges." Basically it is a publicly traded venture capital fund. Supposedly close to 20% of the GSVC's holdings are shares in Facebook.

Here is the intraday price action for GSVC. It rallied this morning, traded around 18.70 until 2:30 PM and then started selling off - down some 6% from that level at the close. The overall market certainly hasn't moved in this pattern.

GSVC intraday price action

Then just after 5PM Facebook files an amended registration statement. The theme is that ad revenue is not keeping up with subscriber growth and Europe is part of the issue.




Not a great comment from a company that has such tremendous growth priced into the expected share value. It's not clear whether or not the IPO range would need to be adjusted. But it does look as though someone knew about the restatement earlier in the day and started selling GSVC before the news became public. This one is hard to prove and given that FB shares are not public yet, it's a bit of a gray area... Nevertheless it points to a possibility that insider trading may be taking place even before the long awaited IPO.


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