Facebook will reportedly halt the trading of its shares on secondary markets by the beginning of April in advance of its $5 billion initial public offering (IPO). The company's representatives instructed firms that participate in trades of shares on secondary markets to cease trading this week, according to two people with knowledge of the matter cited by Bloomberg.
If true, the move will end price fluctuations in private trading, giving Facebook time to account for its shareholding base as it makes final preparations for its IPO, including determining a valuation with bankers and investors. For a while now, employees and early stakeholders have been selling shares privately on SecondMarket and SharesPost. Most of these have been in the valuation range of $80 billion but ever since the company's IPO numbers became public, the valuations have been much higher and auction failures have stopped happening. Individuals and groups using these services have been trying to get as much trading in before Facebook restricts the transactions.
SharesPost sent out an e-mail today warning that the last Facebook auction will close this Friday:
We are writing to advise you that the closing date for our current Facebook Auction has been changed from Monday April 2nd to this Friday March 30th at noon. All bids are due by this Friday at 12:00 p.m. noon PST.
All other terms of the auction remain the same. This auction is for units of an investment vehicle designated to hold shares of Facebook, Inc. (“Facebook”) initiated by SharesPost Financial Corporation today. The number of shares contractually committed for sale at this auction is 150,000 shares of the Common Stock of Facebook. The reserve price is $38.00 per unit. Each unit held by a successful auction bidder will correspond to one share of Facebook held in the designated investment vehicle. The auction will be conducted on a sealed bid basis.
You will be required to complete a suitability certification to confirm that you qualify as an accredited investor and qualified client under U.S. securities laws and regulations prior to bidding in the auction and holding units of the designated investment vehicle. The administrator of the investment vehicle, SP Investments Management, LLC, is a wholly-owned subsidiary of SharesPost, Inc.
The second market is different, but nevertheless, it still gives you a good idea if a company's valuation is decreasing or increasing. Facebook's valuation immediately after its IPO filing was $94.1 billion. The company's highest valuation was $102.3 billion, but it ended February with a $93.1 billion valuation.
It's important to remember that we won't know what the company's actual valuation is until right before the offering is made, which typically occurs about three months after the company files for its IPO. Indeed, the latest rumor slates May 2012 as the expected timeframe for Facebook going public. An exact date still hasn't been determined, but you can expect those rumors to start soon.
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