Late last week, SecondMarket failed to sell any Facebook shares in its weekly auction. This appears to be the first time ever this has happened (this is Facebook auction #43).
The weighted average price for Facebook shares was $33.91, which is in line with the week before. In other words, buyers were not scared off by a price bump. We'll have to watch closely for what happens this week: the situation will either return back to normal or sellers will take lower prices to cash out of Facebook.
So what happened? Have all the buyers who were interested in Facebook moved on? Is the economic uncertainty finally starting to affect SecondMarket users?
Uncrunched points to an article from The Wall Street Journal this past week titled "Web Start-Ups Hit Cash Crunch." Facebook is only mentioned once, but the overall gist of the article is clear: the social networking giant and every other smaller Internet company has found it tough to procure new funding in recent weeks, according to cited investors and entrepreneurs.
In December 2010, Facebook announced that it had raised $1.5 billion at a valuation of approximately $50 billion, but that it had no immediate plans for the funds and would simply continue to build and expand its operations. The transaction consisted of two parts: in January 2011, Goldman Sachs completed an oversubscribed offering to its non-US clients in a fund that invested $1 billion in Facebook Class A common stock, while in December 2010, Digital Sky Technologies, The Goldman Sachs Group, and funds managed by Goldman Sachs, invested $500 million in Facebook Class A common stock at the same valuation.
Facebook's valuation has been all over the place in the months following the investment at $50 billion. Some look at the growth and see great prospects. Others see a dip in the last few months and think Facebook is doomed. The truth is we can only make predictions on the little data we have.
Facebook is going public next year, possibly as soon as Q1 2012 (conflicting rumors argue there will be a delay). Once it happens, the financial data floodgates will open up, and then we'll finally be able to figure out how far the social networking giant will be potentially able to go.