Why Did Facebook Inc. CEO Mark Zuckerberg Sell $95.0 Million of FB Stock?

Facebook Inc. CEO Mark ZuckerbergZuckerberg Plan to Sell 99% of Facebook Stock

Last week on Wednesday and Thursday, Facebook Inc. (NASDAQ:FB) CEO Mark Zuckerberg sold 767,905 units of FB stock to fund his for-profit charity. The sale amounted to $95-million-worth of Facebook stock. (Source: “Mark Zuckerberg Sells $95.0 Million Worth Of Facebook Shares For Charity,” The Huffington Post, August 22, 2016.)

This wasn’t a worrisome liquidation of equity, like when Elon Musk sold shares of Tesla Motors Inc (NASDAQ:TSLA) stock ahead of announcing an offer to acquire SolarCity Corp (NASDAQ:SCTY). In that case, there was an argument that shareholders should be concerned about the founder and CEO dumping his stock.

By contrast, there is absolutely no reason to doubt Zuckerberg’s motivations for selling FB stock. He and his wife, Priscilla Chan, started “The Chan Zuckerberg Initiative” (CZI) in December 2015, soon after the birth of their daughter.

In a letter to their daughter, they expressed a desire to improve the world through philanthropy.

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“For your generation to live in a better world, there is so much more our generation can do,” Zuckerberg wrote in the letter. “Today your mother and I are committing to spend our lives doing our small part to help solve these challenges.”

That being said, the capitalist in Zuckerberg couldn’t sell off his beloved FB stock to fund an unwieldy, bureaucratic, nonprofit organization. He established CZI as a limited liability corporation, giving it the powers and incentives of a profit-making entity. That means it can invest in private startups and make political donations in addition to funding nonprofits.

Its core focuses will be on education, curing diseases, and community building, although it could also provide tangential support for Facebook stock. For instance, Zuckerberg’s other charity, “Internet.org,” is trying to bring a free version of the Internet to impoverished areas of the world. However, it also funnels new Internet users into Facebook’s subscriber base, adding fuel to FB stock’s upward momentum.

Critics say that CZI will likely be just another arm in the Facebook empire. They point to its first investment, a startup called Andela, as proof of this argument. The company trains and recruits software developers in Africa, meaning it could be a supply of low-wage programmers for Facebook’s future endeavors.

“We live in a world where talent is evenly distributed, but opportunity is not,” Zuckerberg said in a statement in June. “Andela’s mission is to close that gap.”