Frothy Facebook Valuation Deters Investors

Shareholders struggling to unload $1 billion in stock

Apprehensive about Facebook’s impending IPO, some shareholders are now trying to cash out their shares of the social-networking company’s stock, the New York Post reports.

A group of Facebook employees and investors tried to unload $1 billion in stock at a $90 billion valuation, but potential buyers weren’t biting. Now, the shareholders are awaiting approval from Facebook to pursue the deal at a valuation of $70 billion, the high end of where Facebook has traded on private exchanges.

But that number might not see results, either. “Even $70 billion is a stretch,” VC Experts analyst Justin Byers told the Post. Based on internal Facebook documents, he calculated the Facebook shares were worth $12 in January, valuing the company nearer to $25 billion—a massive decrease from the amount the shareholders are asking for.

The days of astronomically high tech company valuations could be coming to an end, says the Post. As reports of frothy valuations for Facebook and other companies like Zynga, Twitter and Groupon emerge, some buyers are becoming wary of overpaying based on these skyrocketing estimates and are taking their investments elsewhere. “Secondary buyers are looking for the next-generation social-media companies and are reluctant to pay much higher prices for the largest social-media companies," a private-equity executive said.