Facebook stops private trades for three days

Social network suspends trading of shares on private secondary market until end-week, but halt does not signal public filing is imminent, report states.
Written by Ellyne Phneah, Contributor

Facebook is suspending for three days trades of its stock on the private secondary market, fuelling expectations that the social networking site will soon file for IPO (initial public offering).

While buy and sell orders on such trades can still be made, transactions will not be processed by Facebook's attorneys at law firm, Fenwick & West, according to sources familiar with the matter who spoke to Bloomberg on Wednesday. They declined to be named as details on secondary transactions were private.

The social network had been considering raising US$10 billion in an IPO which would value the company at more than US$100 billion, reports in November stated.

Some companies typically suspend trading ahead of a public filing to ensure investors cannot buy or sell until all of the information is made public, Sam Hamadeh, CEO of New York-based PrivCo, said in the Bloomberg report. "Facebook and companies who do this don't want to expose themselves to lawsuits related to the fact that some people had it before others and were able to trade on it," said Hamdeh, whose firm provides research on more than 30,000 private companies.

However, the private trade suspension does not signal that an IPO is certain, according to the report who cited sources  with knowledge on the issue.

Hamdeh added that private shares can still allowed to be traded on secondary markets between the time of the filing and the IPO, though companies are more likely to restrict transactions closer to the public offering.

Editorial standards