Wednesday, 13 June 2012

'Zuckerpunched By The Secondary Markets...'


'The degree to which Facebook (FB) exercised control over its IPO and strong-armed its underwriters to control its valuation is unsettling. Not only did Facebook take it upon itself to craft its own prospectus, but Facebook's Chief Financial Officer David Ebersman is reported to have told some bankers that he was skeptical over what value banks could make to a Facebook IPO. Apparently Mr. Ebersman didn't see anything wrong with the fox watching the hen house.

Potentially the biggest issue surrounding the Facebook IPO is that Facebook based its valuation on implied valuations which were set in thinly traded secondary markets such asSecondMarket and SharesPost. According to its prospectus, the valuation was determined by relying on "recent private stock sale transactions" between periods Q1-2011 and Q1-2012. In fact, Facebook was so confident that it assigned the implied valuations a 50% weighting in their "fair-market" valuation "due to the significant volume of third-party private sale transactions."

Conveniently, as the implied share price on the secondary markets rose to a high of $45 before the IPO,...........'

Posted via email from Gibraltar Category 2 Residency

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