Dan Niles, chief investment officer of AlphaOne Capital Partners, bought Facebook at under $20 a share. Niles sold his entire stake in the social network over the past few days, though. He didn't even keep his core position.
In a phone interview Thursday on CNBC's "Closing Bell," Niles explained he had several concerns about the social media company going into its earnings release late Wednesday. He thought expectations were just too high, not to mention worries about user growth and its advertising business.
When Facebook reported earnings, the company said it doesn't plan to increase its number of ads, which Niles said is a key driver of revenue. The only other way to increase revenues is to attract more users or raise advertising rates, he said.
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"Users are slowing down, the number of ads probably is pretty consistent, so now all you've really got left is the pricing lever to pull and so that makes it a lot tougher from here with the stock having really doubled in three months," Niles said.