Facebook directors are bailing on the social network group and the prices they are taking for their shares is way under the value placed on the shares when Microsoft bought into the Company 6 months ago.
BusinessWeek claims that Facebook was widely viewed as the next Google in Silicon Valley and as a result Microsoft purchased shares that indicated that a valuation of $15 billion for the whole company. Shareholders in the still-private company appeared to be setting themselves up for a blockbuster initial public offering.
But in recent months, a number of current and former executives have put some of their stock up for sale. Laurence Albukerk, who brokers the sale of stock in private companies in the Valley, says he knows of at least nine people who have sold or are trying to sell Facebook shares. He estimates “dozens” are peddling stock altogether, through him or other brokers. Another finance executive, who would not speak for attribution, confirmed Facebook insiders are selling. Among those who have sold are CEO Mark Zuckerberg and executive Matt Cohler. A Facebook spokeswoman said both declined comment for this story.
The prices for Facebook shares in these transactions are far below the $15 billion level. Albukerk, the founder and managing director of EB Exchange Funds, says two current directors and one former executive recently contacted him about selling some of their stock for a $5 billion valuation. He also says two investment firms have bought large chunks of Facebook stock at a valuation of about $3.75 billion. Hans Swildens, founder of a San Francisco firm called Industry Ventures that buys stock in private companies, says his firm has been talking with a growing number of Facebook employees. “There’s a lot of interest among people to sell shares,” says Swildens.
Rank-and-File Stock Sales
Such stock sales are both unusual and controversial at technology startups. In the past, entrepreneurs haven’t had the chance to cash in until their company goes public or is sold. When they do sell, it can create conflicts of interest with venture backers and other employees who haven’t realized the same wealth. The sales at Facebook have led to controversy within the graffiti-covered walls of the social network’s Palo Alto (Calif.) offices. After word got out that Zuckerberg, Cohler, and other top employees sold, there was grumbling among the rank and file, say two financiers who have spoken with the company’s staff.