Investors Have Two More Shots to Trade Facebook Pre-IPO
It’s the end of an era.
Private market trading in Facebook — the company that created the need for secondary brokerages in the first place — will be suspended after this week as the company takes final steps toward its initial public offering slated for May, according to people familiar with the matter.
The decision to halt trades is to allow the social networking giant time to prepare its first-quarter audits and internal shareholder counts without the shareholder base in flux, these people say.
More importantly, time is running out to trade: Each transaction — which requires the company’s approval — takes 30 days to clear. Facebook has indicated that trades made before April 1 will settle, according to one of the people.
To make the deadline, SharesPost moved to Friday a transaction that had been regularly scheduled for Monday, according to an e-mail viewed by CNBC. The transaction plans to offer 150,000 at a price of $38.00.
SecondMarket, the largest private-shares brokerage, traditionally holds auctions on Wednesday. Last week, the firm cleared a quarter of a million shares at a price of $40, implying a $100.4 billion valuation for the social network. Additionally, last week SecondMarket announced a one-time “Facebook fund,” allowing potential buyers of smaller batches of shares to access part of a bulk supply — a move that would signal a desire to to match as many of the remaining shares as possible.
A source tells CNBC that SecondMarket has moved up the close of its final auction to the evening of Tuesday, April 3 - replacing its regularly scheduled auction for the next day. CNBC had previously reported the date as April 4 before the expedition took place.
Other internet companies have operated on similar timelines before going public. Groupon and LinkedIn suspended trading on secondary markets several weeks before the IPO, while Zynga chose to restrict trading farther in advance, people familiar with the deals have said.
Facebook is still responding to questions raised by the Securities & Exchange Commission over the content of its S-1 filing, which was originally submitted on Feb. 1.
Follow Kayla Tausche on Twitter: @kaylatausche