Even if you've created a company which cures cancer, educates the world's children, and solves global poverty at a 40% profit margin, once you have 100% of your multi-billion dollar fortune tied up in it, it's time to diversify.
So, if you believe that Thiel is a savvy investor, then it's hard to be bullish in Facebook.
Didn't USV did a similar thing on twitter? Before IPO?
Let's say Company X has a 10% chance of being worth nothing, and 90% chance of being worth five times what it is today. Is that a good investment? Of course. Would you want to bet a billion dollars on it? If you had $20 billion, sure -- if you had $1 billion, probably not.
You can easily create a real-world analogy, a dice game where you pay me $X and roll a single die. I keep your money if you roll a six, but give you five times your money back if you roll anything else. You can only play once. How much do you bet? I hope you do bet something, because it's a very favorable game to play, but I also hope that you don't sell your car, house, everything in your refrigerator, and your dog to wager everything you have.
The IPO price is not really relevant since he couldn't sell at that price -- he sold nearly everything at the first chance he had, which was wise of him regardless of whether Facebook's stock price goes to $0 or $500.
The bottom line is that this has nothing to do with Facebook and is based solely on the mathematics of random variables.
No, it isn't what I would do. You might re-balance your portfolio if your capital is limited, but you'd be crazy to sacrifice high expected returns for the sake of zero beta. Admittedly, my personal portfolio is much smaller than Peter's.
>"How much do you bet?"
If I were looking to profit from games? A lot. What I wouldn't do is go to a game with worse odds, that paid me for a roll of 6, for the sake of "diversifying", which is essentially what you're implying by saying Thiel sold his stake for this purpose. I would stick to the game with the best odds just like I would stick to the asset with the highest expected return.
I other words, if Mr. Thiel truly believed FB was a $100BB company, he'd be a fool to sell off his shares right now. I think this reveals that he doesn't really believe that. Neither do I, so I don't blame him.
You could claim that everytime an insider at any company sells the majority of his stock he is diversifying. But that's not really looking at what the real reason is. There is a reason that "now" is the "time to diversify". And it's not just because diverisification is generally smart investing.
I guess Facebook represents something for a lot of HN commenters. When Facebook starts it's decline it signifies some larger problem.
It was a tremendous success, some people made many millions from Facebook. So what's the problem if the fad dies down and it all goes south eventually?
(quote from WSJ/All things D).