Feb 5, 2012

At Least One Seller Cashing Out on Facebook Before the IPO

The forthcoming Facebook IPO has been all the hype - and large amounts of it. Most of the pundits have been negative, citing overblown Price/Sales ratio and a shift in user base from developed to developing countries. Since the sentiment is quite negative, the IPO would probably do OK at least at first. The Nasdaq closing at an 11-year high on Friday certainly indicates strong investor demand for tech stocks and the social network space has a scarcity of liquid public stocks as a vehicle for betting on the future of the sector.

There are signs that the hype may be too much. According to Reuters, a woman in Wisconsin was arrested
for selling fake pre-IPO stock in Facebook to a construction contractor. Almost reminiscent of the taxi driver test (for stock market froth) except that this time the shares are unlisted.

Also at least one investor has decided that $94 billion valuation is too high and decided to cash out. According to Bloomberg, 100k Facebook shares changed hands at roughly $40/share on a market for unlisted shares. Shareholders of private companies almost always know more than the general public, so whoever the seller was, he probably knows something we don't.

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