The stock market today is abuzz with rumors that social networking giant Facebook might be preparing to file it’s IPO (Initial Public Offering) with the SEC as early as next week. These rumors originated after Bloomberg news and other agencies reported that Facebook has suspended trading of it’s shares in the secondary markets.
Some sources, who declined to be named citing that details on secondary transactions are kept private, stated that while buy and sell orders can be placed, transactions won’t be processed by Facebook’s attorneys at Fenwick & West from Jan 25 to 27. The sources also said that the halt in trading pertains to trading of Facebook shares only.
What Are Secondary Stock Markets?
A secondary market is a place where investors purchase securities or assets from other investors, rather than from issuing companies themselves. So share holders in companies that are not yet public can still sell their shares on these secondary stock markets. Agencies like SharesPost.com faciliate the secondary market transactions, connecting buyers and sellers of stock in many of the large and popular private companies, like Facebook, Twitter and more.
So Why Was Facebook Trading Halted?
When companies plan to go public with an IPO offering, they stop processing transactions of their shares in the secondary markets and suspend all trading. This is done ahead of an IPO filing to make sure that investors can’t buy or sell until all of the information is made public via a prospectus. That’s why this move by Facebook today is seen as an indication that it is going to file for an IPO very soon: we are talking days, not weeks or months.
What Is Facebook’s Current Valuation?
Sharespost is quoted in the New York Times as having recently sold 70,000 Facebook shares for 34 dollars a share in it’s secondary market place, a price that puts Facebook’s valuation at 80 billion dollars. Most stock analysts and industry insiders are putting Facebook’s valuation at between $75 billion to $100 billion