Has George Soros been playing mind games?
If Facebook’s share price hitting yet another low ($19 last week and sinking) is happening with alarming regularity and fast becoming the archetypal ‘dog bites man’ story in terms of newsworthiness, the same can’t be said for billionaire investor/fund manager/philanthropist, George Soros, who, it has been revealed, has been buying up stock in the unloved US social media company in recent months.
In a 13F filing to the SEC, Soros – through his investment vehicle, Soros Fund Management – bought 341,000 shares in the quarter ending June 30. The filing, released by the SEC 45 days after the close of a quarter, only shows a fund’s stock positions, not its bond holdings or short positions in stocks, however.
While analysts can argue the toss over whether the Facebook ‘business model’ justifies a $15, $20 or even $25 share price – investors have long given up seeing value beyond $30, let alone the original $38 IPO price – what’s seems odd is Soros’s timing, given the price cap that will be weighing down on the company over the coming months as lock-up periods expire.
If May’s IPO saw 421m shares offered to investors, the expiry of the first lock up period last week means pre-IPO investors are now free to sell a further 271m shares into the market, thereby increasing the number of tradable securities in issue by more than 60 percent. With further lock-up periods set to expire over the next nine months an extra 1.44bn shares will be freed up for sale to potentially put even more downward pressure on the company’s share price.
If George’s timing seems odd, it won’t have been the first time. In January 2010 he used his familiar pulpit at the World Economic Forum in Davos to call time on the gold market, claiming the yellow metal had become the ‘ultimate asset bubble’. Yet a subsequent regulatory filing showed Soros Fund Management had upped its stake in SPDR Gold Trust – the world’s largest gold bullion backed ETF (Exchange Traded Fund) to 6.2m shares from 3.7m in the three months through end-2009.
Oddly, it wasn’t until Q1 2011 that George decided to make a major move – cutting his exposure in SPDR Gold Trust from 4.271m shares to just 49,900 shares and offloading all 5m shares in iShares Gold Trust. This came after the price of gold had climbed remorselessly from $1150 in January 2010 to an all-time high of $1920 in September 2011, before slipping back to a trading range of $1330 to $1430 in Q1 2011.
Cynics will charge that a November 2010 speech before the Canadian International Council, where he reversed course by saying conditions were ‘pretty perfect’ for the price of gold to continue rising, coupled with January 2011 comments that the commodities boom still had ‘a couple of years to run,’ was his way of trying to talk up the market while simultaneously getting out of it. Seasoned investors long accustomed to George’s market actions seemingly contradicting his public musings, will likely have done the same.
In the meantime, Soros more than doubled his holding in SPDR Gold Trust during the March-June 2012 period, increasing his stake from 319,550 shares to 884,400 shares. Yet if he is once again climbing aboard upon the gold train, he may find it heading in the direction, especially if the latest World Gold Council data showing gold demand falling to 990 tonnes in Q2 2012 (the lowest since Q1 2010 and down 7 percent year-on-year) forms part of a longer term trend.
It isn’t entirely clear whether Soros has been playing games with himself or the rest of us. What is clear is that his new found love for Facebook won’t afford him the luxury of keeping the markets guessing. He can neither talk the market up nor talk it down – the expiry of the lock-up periods will see to that. On the other hand, it may make no difference at all as he could have been quietly shorting Facebook all along and making mugs of us all.