The Goldman Sachs-DST investment of $500 million in Facebook and the Goldman-managed sale of $1.5 billion of the company’s stock was not the end of its long-running efforts to reward its employees — and control the stock they have earned in the company.
Since that sale, Facebook has reportedly considered a $1 billion sale of employee stock to large investment firms. Meanwhile, outside valuations of the stock continued to climb on private secondary markets, where the stock is sold by former employees and other stockholders to the highest bidder, past the $50 billion mark specified by Facebook and Goldman in the January sale.
Here’s a quick look at the trends and issues, as Facebook heads toward April 30, 2012, when it will begin publicly reporting its financial numbers (and possibly consider plans to go public).
T. Rowe Price is the most recent big investor. As of this month, it has listed Facebook in portfolios of around 20 of its funds, for a total value of $190.5 million. It’s not clear when the investments occurred or at what original valuation, but they were likely recent, and were either arranged by Facebook or had its blessing.
In March, another large investment firm, General Atlantic, reportedly was in the process of buying shares owned by former employees, and at a $65 billion valuation. The CNBC report said that Facebook had not yet agreed to let the deal go through; it’s also not clear who was arranging the transaction.
The highest valuations to date have been coming out of secondary stock markets like Second Market, which operate by selling former employee stock to accredited investors (current employees are banned by Facebook from independently selling stock). The amount of stock being sold here keeps shrinking, as Facebook does everything it can to manage the sales process itself, and meanwhile demand has continued to go up. For example, after some weeks with shares sold numbering in the millions, SecondMarket’s most two recently leaked emails about auction results show it brokering auctions of just around 100,000 shares — but at valuations of $70 billion and then $85 billion.
Facebook isn’t just trying to control the shareholder account to below the 500-holder marker where it’s forced to publicly share financials. Its own internal valuation is affected by outside markets, as they create a marker for demand normally lacking among non-public companies.
On that note, Facebook’s last reported stock price put its valuation at only around $25 billion, according to filings tracked by VC Experts — the last one of which was received on January 4, 2011, apparently not reflecting the price of the Goldman deal.
Based on Facebook’s need to keep employees happy through stock sales, its increasing costs from expansion, its need to control its stock — and its reported plan to sell $1 billion in employee shares — we expect to hear more news in the coming weeks and months about expensive stock purchases by large financial firms given Facebook’s blessing to buy.
We’ve come a long way from 2008, when Microsoft’s $240 million investment in Facebook at a $15 billion valuation shocked the technology world.