A Major Shareholder Dumps His Facebook Stock, Should You?

By Jamal CarnetteFool.com

Over the last three years, it's been a good run for Facebook . Since the beginning of 2013, the company's shares have increased nearly 300%, going from approximately $30 per share to its current price above $100 per share.

To be fair, it isn't as if the company isn't deserving of its surging stock price. In the oft-quoted monthly-active-users figure, Facebook has grown its user base from 1.06 billion at the beginning of 2013 to 1.55 billion as of the recently reported third quarter.

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As far as financials go, the company has grown from $5 billion in revenue and an EPS of $0.01 at the beginning of this timeframe to a company analysts expect to report $17.5 billion and an EPS of $2.16 in the current fiscal year. All in all, it seems Facebook is moving from strength to strength.

The stock market is a forward-looking mechanism, however, and past successes are soon forgotten. More recently, a major Facebook shareholder is dumping his shares -- should retail investors follow his lead?

Marc Andreessen sold nearly all his stockAccording to Securities and Exchange Commission filings (h/t Recode), Marc Andreessen has sold nearly three-quarters of his total ownership in the company over the last two weeks, a figure Recode reports as roughly $160 million. Even more interesting, these filings appear to have occurred in the course of the last two weeks -- a rather short time to sell a large holding of one company.

This is noteworthy on a few other fronts as well. First, Andreessen is on Facebook's board of directors, and is a member of the compensation and governance and audit committees. Secondly, Andreessen is a very influential figure in the Silicon Valley venture capitalist scene, as the firm he founded, Andreessen Horowitz, was the largest in the U.S. on the basis of early-stage investments in 2014 (more on this later).

Ready to short Facebook ... don't (at least not on the basis of this data)"Noteworthy" shouldn't be confused with "actionable" for a few reasons. Large, connected investors sell stock for a host of reasons. They are people, after all, with competing obligations, potential investments, and other uses of capital. For Andreessen, an accredited investor with an eye on the potentially high-payoff seed, venture, and pre-IPO markets, the choice could be either to invest in Facebook today or to invest in the next disruptive company like Facebook in 2005 -- an option most investors do not have.

In this case, it's not an indictment of Facebook's path ahead. After all, Andreessen is still on the board of directors and continues to own a significant percentage of Facebook's shares. And that's only one reason for liquidity -- other uses are for noninvestment-related spending like primary residences and charitable donations.

For current investors, as interesting as this may be, it's background noise in the investment thesis. Continue to evaluate Facebook on its operations, not on the basis of what one influential investor is doing. The company continues to grow its revenue and EPS at a healthy clip, and that's how the company should be evaluated.

The article A Major Shareholder Dumps His Facebook Stock, Should You? originally appeared on Fool.com.

Jamal Carnette has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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