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Facebook’s Years of Private Trades Revealed

Friday, 18 May 2012 | 6:04 AM ET

On April 2, 2008, a lucky buyer picked up Facebook stock on the private market for a paltry $3.50.

While those shares have now ballooned to a value of $38 per share, it’s been a fascinatingly complex and, at times, bumpy road for Facebook’s private pricing history — the details of which, once closely guarded industry secrets known to just a small class of buyers, sellers, and market-makers, is being fully revealed by SecondMarket, in data first disclosed to the public on CNBC.com.

In the four-plus year history that Facebook has traded on the exchange, which acts as a marketplace for restricted or other illiquid securities, the company saw its most volatile days within the first 12 months of trading.

At first trade, Facebook’s implied valuation stood at a remarkable $8.1 billion, more than 16 times higher than venture capital valuations implied by capital raises in 2006. That first trade may have been a bit overly enthusiastic. Roughly 13 months later, valuations cratered some 70 percent to just $2.6 billion with shares worth just a little more than a dollar.

While over that time, the social network was growing by leaps and bounds (adding more than 300 million users in 2008 and 2009), its stock was perhaps mirroring a broader market reality of the global financial crisis. But trading was thin, likely exacerbating the volatility for those small number of shares on the market.

Facebook: Path to Going Public
CNBC
Facebook: Path to Going Public

As global markets began to rebound and the company continued to grow, Facebook experienced a period of absolutely explosive private market growth. Over the course of about a year and half (from October 2009 to July 2011), the company saw the price of its shares increase tenfold — a valuation which grew by some $77 billion (roughly the same size as corporate titans like Home Depot and Bank of America ).

What's the Deal with Facebook's Private Shares?
CNBC's Kayla Tausche reports on Facebook's private trading history on SecondMarket, a private platform for exchanging shares.

No doubt fueled in part by a collection of private market social media companies going public, including LinkedIn , Pandora Media , and Zillow , that surge proved overinflated. And as the word “bubble” re-entered the social and startup lexicon, prices and valuation declined.

When the company filed to go public on Feb. 1 of this year, it set the private market ablaze again as investors clamored to get ahead of the IPO, and get trades done before shares of the company were frozen in early April, shutting down the market for good.

SecondMarket saw record demand for shares over much of that time: In the first quarter, it completed a record 137 transactions, some of which would run the price up as high as $43.50 valuing the company at more than $100 billion — a massive run-up, and more than 40 percent higher compared to where Facebook was internally valuing its shares around the same time.

As Facebook now begins its new life as a public company, it is expected to draw tremendous interest from retail investors — a block of owners with a reputation for adding volatility to a stock. So it's probably safe to say, for Facebook, the trading roller coaster may have only just begun.

—By CNBC’s Jesse Bergman
@JBergmanCNBC

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