Trading in shares of still-private Silicon Valley companies such as Facebook Inc., Twitter Inc. and LinkedIn Corp. has surged in recent months, suggesting strong investor interest in some technology start-ups despite a moribund market for initial public offerings, The Wall Street Journal reported Tuesday.
Though the firms remain private, they have shares, and some employees or investors who have received such stock want to cash out. Others want in. The sellers and buyers can be matched through private deals or by exchanges that have sprung up to bring them together.
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The spurt suggests bullish investor interest in companies that may come to market over the next couple years. But the trading is also raising concerns among investors and inside some private companies about abiding by regulations and keeping market expectations in check.
Trading in shares of Facebook has been particularly strong in the past month. The surge began after a big transaction in November, when venture capital firm Accel Partners, an early backer of the social-networking firm, sold less than 15 percent of its stake for $517 million, say people familiar with the deal. The deal, some details of which were reported on tech blogs, valued Facebook at around $35 billion, those people say.
Soon after the sale, Facebook's trading volume and price surged on SharesPost and SecondMarket, two exchanges that allow trading of closely held firms' shares. In the past month, the average valuation of Facebook based on transactions on SharesPost has risen almost 25 percent, to more than $56 billion, the exchange said. SecondMarket said Facebook's valuation had risen about 12 percent over the same month. Such differences are possible because these are not public markets.
Facebook trading is the most visible part of a growing market for shares of private tech companies. SecondMarket and SharesPost, based in New York and the Los Angeles area, respectively, began offering trading of private company stock in the first half of 2009.
SecondMarket said it has transacted nearly $400 million in private company stock this year, up from about $100 million last year. SharesPost declined to cite dollar figures but said it did 50 private company stock transactions in its first six months of operation and 150 in the 12 months since.