What T. Rowe Price's Investment in Facebook Says About the IPO and Secondary Market

Source: facebook.com

T. Rowe Price is giving its investors a piece of perhaps the hottest company in the world -Facebook. The mutual fund company has a $190.5 million stake in Facebook, as well as a $71.8 million stake in Zynga and a $86.8 million stake in Groupon.

Back in 2009 T. Rowe participated in Twitter's $100 million round of fundraising, along with Morgan Stanley .

These social media investments are just a tiny piece of T. Rowe's $482 billion in assets under management. But it's a meaningful statement that the company is staking a claim in a hot market, that's not usually accessible to ordinary investors.

But T. Rowe's growing investments in social-oriented Internet companies - now topping $500 million in 19 funds - is a testament to the changes we're seeing in the IPO market and the growth of the second market.

My colleague Lori Spechler suggests that this means a Facebook IPO is coming soon.

But I think this has another message.

Bottom line: some of the very hottest companies are opting to stay private far longer than ever. We are looking at a two tiered market - public companies and the companies that can only be accessed through funds like T. Rowe's or platforms for accredited investors, like SecondMarket.

Venture Capital Investors spent more in the first quarter than a year ago - investing $5.87 billion in 736 US-based companies. But the size of each investment is getting bigger - 21.6% bigger than the average deal in the year-ago quarter. This stat raises speculation that we may be headed towards a VC bubble. The fact that the IPO market for fast-growing Internet companies has stagnated is fueling big venture capital investments, many in companies that are further along than typical VC deals.

And of course there's more demand for private company shares in the secondary market than ever. We can expect funds that feature the likes of Facebook - from companies like Felix Investments. And of course trading on SecondMarket and SharesPost is sure to grow as big as the companies issuing private company shares will let them.

All these funds and secondary market trading promise one thing - greater oversight from the SEC. We may see the SEC issue its guidelines for insider trading and the like as soon as this summer.

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