Facebook Inc. (FB) is halting the trading of its shares on secondary markets by the beginning of April as it prepares for an initial public offering, two people with knowledge of the matter said.
Representatives of Facebook instructed firms that help investors buy and sell stock in closely held companies to cease trading of its equity this week, said the people, who asked to not be identified because the conversations were private. Facebook aims to hold its IPO in early May, one person said.
Facebook, which filed in February to raise $5 billion in the largest-ever Internet public-market debut, is actively traded on secondary markets, including SharesPost Inc. and SecondMarket Inc. The halt gives the company time to account for its shareholding base and would end price fluctuations as Facebook confers with bankers and investors to determine its IPO valuation, said Lise Buyer, principal at Class V Group.
“It wouldn’t surprise me if they wanted to let the market settle down before they head out on a roadshow” to meet with would-be investors, said Buyer, who helped advise Google Inc. on its 2004 IPO. Her firm is based in Portola Valley, California.
SharesPost moved the date of a Facebook-share auction to March 30, the online marketplace said in an e-mail to its users yesterday. Previously, the auction had been set for April 2.
“At Facebook’s request, SharesPost will cease facilitating transactions in Facebook stock as of Friday end of day to help ensure the company’s orderly transition into the public markets,” the company said in note to clients today.
While the trading of startup shares lets early employees and investors make money from holdings, it has come under regulatory scrutiny because the transactions can lure investors who may not understand the company and the risks involved.
Earlier this month, the U.S. Securities and Exchange Commission settled with SharesPost to resolve claims that the online marketplace acted as an unregistered broker of shares, its first action in a broad probe of trades involving nonpublic startups.
Facebook’s implied value dropped 5 percent to about $93 billion in a late-February auction of a fund that holds shares of the social-networking company’s stock. The sale set a price of $40 apiece for 125,000 units of the fund, according to San Bruno, California-based SharesPost, which managed the auction. A Feb. 14 fund auction valued Facebook at about $98 billion.
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