Zynga Inc. and Facebook Inc. led a 51 percent surge in the private market valuations of top Web companies in the first quarter, according to Nyppex LLC.
Zynga, maker of the “CityVille” and “FarmVille” online games, rose 81 percent in value from the fourth quarter to about $8 billion, Nyppex said today in an e-mail. Facebook, the world’s largest social network, climbed 57 percent to about $65 billion. The valuations are based on transactions among institutional investors.
As the top venture-backed Web companies stay private longer, some early stakeholders and employees are selling to investment firms including Goldman Sachs Group Inc. and Russia’s Digital Sky Technologies. Demand for technology startup shares is also growing in the mutual-fund industry, where T. Rowe Price Group Inc. and Fidelity Investments are boosting their stakes.
LinkedIn Corp., the business-networking site that filed for an initial public offering in January, rose 43 percent in value to about $2.2 billion, while Web daily-deal site Groupon Inc. increased 19 percent to $5.6 billion. Twitter Inc., the microblogging service, rose 7.7 percent to $4 billion.
Nyppex, a Rye Brook, New York-based research and advisory services firm, tracks eight of the fastest-growing social-media startups, and produces reports for money managers, venture funds and corporations. Total valuations jumped to $86.1 billion in first quarter from $56.9 billion at the end of December, said Laurence Allen, managing member at Nyppex.
Allen estimates the value of secondary transactions will almost triple to $6.9 billion in 2011 from $2.4 billion in 2009. Secondary deals involve buying stock from existing shareholders, including employees, rather than directly from the company.
The market’s expansion has caught the attention of the U.S. Securities and Exchange Commission. Regulators focused on the business after Goldman Sachs halted a planned offering of as much as $1.5 billion in Facebook shares to U.S. investors. Goldman Sachs said on Jan. 17 it pulled the offer because of concern that “immense media attention” could violate SEC rules limiting marketing of private securities. Goldman Sachs led the investment in Facebook that valued the company at $50 billion.
Mark Heesen, president of the National Venture Capital Association, called the regulatory concern a “major issue” at his group’s annual meeting in Boston this week. Arlington, Virginia-based NVCA has a standards committee and will be asking its 400 member firms to create their own policies on handling secondary offerings, Heesen said.
“Every firm should have a best practice on how you deal with employee and partner private transactions in your firm,” Heesen said. The venture industry should prove to regulators that it’s a “community that self-monitors,” he said.
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