Shareholders of Facebook Inc., the social-networking site preparing an initial public offering, are facing a three-day suspension of trading on secondary markets this week, people with knowledge of the matter said.
While buy and sell orders can be made, transactions won’t be processed by Facebook’s attorneys at Fenwick & West LLC from today until Jan. 27, said the people, who declined to be named because details on secondary transactions are kept private. The halt pertains to trading of Facebook shares only, one of the people said.
Facebook, the world’s largest social network, is considering raising about $10 billion in an IPO that would value the company at more than $100 billion, a person with knowledge of the situation said in November. Private companies sometimes halt trading to ascertain how many shareholders they have, said Barry Silbert, chief executive officer of SecondMarket Inc., an exchange where Facebook shares are traded.
Some companies suspend trading ahead of a filing to make sure that investors can’t buy or sell until all of the information is public, said Sam Hamadeh, chief executive officer of New York-based PrivCo.
“Facebook and companies who do this don’t want to expose themselves to lawsuits related to the fact that some people had it before others and were able to trade on it,” said Hamadeh, whose firm provides research on more than 30,000 private companies.
IPO Filing Timing
This week’s halt doesn’t necessarily mean the filing is imminent, the people familiar with the matter said.
Private shares can still be traded on secondary markets between the time of the filing and the IPO, though companies are more likely to restrict the transactions closer to the public offering, Hamadeh said.
Employees and early stakeholders have been able to sell shares privately using exchanges such as SharesPost Inc. and SecondMarket. Buyers are typically institutional investors.
Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment, as did Merredith Branscombe, a spokeswoman for Fenwick & West. Representatives of New York- based SecondMarket, and SharesPost, based in San Bruno, California, also declined to comment.
Facebook is valued at $73.4 billion on SharesPost’s website, an estimate that takes into account transaction prices, research estimates and financing round valuations. The last contract listed on SharesPost was completed yesterday at $34.50 a share, or an implied valuation of $82 billion.