Facebook to Face Disgruntled Investors at its First Ever Shareholder Meeting

Facebook FB was the beneficiary of really good timing on Monday ahead of it’s first-ever shareholder meeting on Tuesday.

On Monday, rumors circulated that Facebook would be added to the S&P 500 sooner rather than later. Paul Larson, chief equities strategist at Morningstar, said that the company’s inclusion could be, "imminent--within a couple of weeks."

This sent the stock soaring but then came the upgrades. One, from Topeka Capital analyst Victor Anthony who referred to a recent Facebook presentation that touted its ability to target various segments of Facebook in order to allow advertisers to reach the right people at the right time.

Stifel not only reiterated that Facebook would likely be included in the S&P, it also upgraded the stock from “Hold” to “Buy” saying in the note that “Every so often in Internet investing, a stock's recent underperformance causes investors to make up reasons why a company will miss its financial estimates. We believe that is the case with Facebook today, and would add to shares at current levels,”

Why is this news such perfect timing? Because on Tuesday, Facebook holds its shareholder meeting and what better way to calm some unhappy shareholders than to log a 4.5 percent move to the upside the day before.

Without question, shareholders are going to want to know why Facebook IPOed only to save up billions of dollars in cash, and second, why so many key company officials are selling their stock. In other words, why is it that the stock is down substantially from its IPO price?

Marketwatch makes the case that shares aren’t rising despite the company’s 30 to 40 percent growth rate largely because of the constant stream of insider selling. In the last two months, Chief Financial Officer David A. Ebersman, Chief Operating Officer Sheryl Sandberg, Chief Technology Officer Michael T. Schroepfer and Vice-President and General Counsel Theodore Ullyot all sold stock.

Mark Zuckerberg owns 60 million share but has vowed not to sell any until, at least, September.

Shareholders want to know why they should have confidence in the stock if the insiders holding the stock do not.

Second, why is the company holding on to more than $11 billion in cash and what are its plans for deploying at least some of it? Especially so soon after its IPO, investors want to see their money invested to grow the company—at least to the point where the stock isn’t down 40 percent off of its IPO price.

If that isn’t enough, the LA Times reports that environmental activists are expected to be there to protest Zuckerberg’s foundation’s support of lawmakers who support the Keystone XL pipeline.

Disclosure: At the time of this writing, Tim Parker had no position in the equities mentioned.