Facebook may have talked a few investors, including Microsoft, Hong Kong billionaire Li Ka-shing and Germany’s Samwer brothers, into investing in the company’s preferred stockat a $15 billion valuation.
But that’s a hard number to justify given Facebook’s revenue projections and comparisons to other big networks, and a lot of people think it’s vastly overvalued at that price. And at least one stockholder is quietly looking to sell some stock at a value significantly lower than that $15 billion.
It’s probably more than one, actually. We’ve been chasing rumors (none confirmed) for months that some vested non-exec employees have been trying to sell common stock, that some early VCs are trying to move preferred stock, and even that founder Mark Zuckerberg explored selling some stock at a $6 billion valuation.
Now, though, we’ve got our hands on a smoking gun of sorts. Bill Dagley, the Managing Director at a firm that manages money for high net worth individuals called Private Wealth Partners in Larkspur, California, has been sending out feelers to venture capitalists and wealthy individuals who may be interested in buying stock from a Facebook shareholder at a value far less than $15 billion.
We’ve been forwarded one email conversation from a source, where Dagley asks if they’d be interested in “buying shares of Facebook from current holder?” Another person who was approached said the asking price was $3-$4 billion. A third source says the total amount of stock being sold is around $30 million.
The seller was never disclosed, but it’s likely a current or ex-Facebook exec who wasn’t required to sign special agreements with investors during the venture rounds. That likely means they can theoretically sell their stock once it’s vested and paid for.
Everyone we’ve talked to has turned down the offer, although it’s my guess that there are buyers at this price. Heck, I’m in for at least one share.
If you’re interested in Facebook at that price, give Dagley a call. I’m sure he’ll be thrilled to hear from you.
I don’t want.
But I look forward to buy some Techcrunch shares. So put me on the list.
Facebook are really becoming powerful now !!
This is what we seem to understand when we look at http://www.themostpowerfulcompany.com we see that they are in good position
good luck mr zuckerberg
http://www.netflix.com/Movie/E.....m/70024087
I’ll pass thanks!
So what will happen if the stocks are sold at a 3B valuation ? Will those that bought are 15B lose out ??
Actually it does not matter .. I guess if they are bought for more than 15B …
Well …I dont know …
Facebook are really becoming powerful now !!
This is what we seem to understand when we look at http://www.themostpowerfulcompany.com we see that they are in good position
good luck mr zuckerberg
I’ll be interested in buying one share but I’m sure Dagley would hang up when he hears that I’m going to buy just 1 share.
Mike, so I guess FB didn’t have a co-sale agreement in place?
My bet is that the seller is the ConnectU guys who received stock in their settlement…and probably want to dump asap. I would guess that they received straight common stock and negotiated the ability to sell it.
The most I’d buy at is a 30x earnings multiple. Last I checked their cash flow was negative to the tune of 150 million.
erm, I’ll pass. wall street will cry foul when this one goes ipo
who was the idiot that had a niche site at 15 million to begin with?
O that was microsoft
Dan, from my conversations, no, FB doesn’t have ROFR or cosale agreements in place with most execs and normal employees, which is normal. There are usually other hurdles to overcome in a private sale, but the nature of U.S. law is to try to keep stock liquid, even in private companies. That’s why ROFR and cosale agreements are so popular, since outright permanent bans on sales of stock are simply unenforceable.
Mike, gotcha. I guess that’s why Google was so smart to put in place an internal market for employees to sell their options/stock. I’d assume that FB probably has something much the same? Also…just sent you an email.
I really hope that isn’t the case. If this is true at all Facebook has issues.
Remember when Sarah Lacy was giving Zuckerberg a hard time about the $15Bn valuation at SXSW? Perhaps the Twitter-stormers should have been listening instead of talking…
The $15 Billion Valuation is the biggest piece of misinformation ever. It was an investment + advertisement deal, so only part of the money was for an investment. No one outside of Microsoft and Facebook knows what the actual valuation was.
The $15 Billion Valuation is the biggest piece of misinformation ever. It was an investment + advertisement deal, so only part of the money was for an investment. No one outside of Microsoft and Facebook knows what the actual valuation was.
mike, I really believe that in two years facebook will be worth next to nothing. I think that Google and others pushing more open standards that in a sense are trying to dissolve facebook. Let’s put it this way, I don’t use facebook because I have so called attachment to it, its just where all my friends are. No one deserves to make money off of this and as soon as I have a very open portal which I can deploy and pull data from anywhere on the web that has to do with my friends. I think zuckerberg will explore this option as he already feels bad about the connect u situation, he’s had a great run, and now its time for google to put him away. I have a lot of friends who feel this way about facebooks valuation, even a facebook exec who I can’t name.
Jason@stomelmedia.com
=jason, well, me and my soon to be acquired one share of facebook stock disagree.
I want a single share as well!
Zucky, please mail the stock certificate to my home address. It’s going on the wall!
Wow, so after being completely wrong about the future of Facebook, the question must be asked what does Arrington actually get right? The future prospects of Twitter? Mahalo? Microsoft?
And seriously Arrington, is Facebook even worth $3B? You’re an idiot.
I use Facebook all the time, at least twice per day. But I’d never pay for it, and I have never seen any ad on it that I found even remotely useful.
When a new social network emerges, I’ll probably jump ship, just like everyone did from Friendster to Myspace and Orkut to Facebook. There is no “last” social network, like Facebook tried to pass itself off as.
A few years from now, people will regard Facebook’s failure to sell out at the top of the market (between 2006-2007) as one of the biggest blunders in Silicon Valley history.
Ouch.
@mike arrington, i agree with =jason that facebook doesn’t hold much value to me now that i’ve moved on from college. as friends move on to daily business email, im, and other online services facebook has become less and less relevant. in the same way, as data portability increases online the younger, more net savvy crowd will find ways to communicate outside the bounds of facebook. standalone web apps, mobile applications, will render facebook obsolete in ten years.
tell you what, when facebook tanks and that piece of facebook stock valued at 3bil is worth nothing, you can sell it to me for 100bucks and i’ll put on my office wall as token of my genius.
two years not ten years!!!!! facebook will be dead in two years!
yes…for a small 5k bet, it’s a no brainer
I use FB every once in a while and gratefully ignore all shitty ads and all polls to just use it for free - I would never pay nor I would buy anything from all the silly advertisiers wasting their money on a hype trend - regarding the nice share:NO THANKS - it would be worthwhile to buy some shares from an American car manufacturer!
Poor Mark!!!
I’d also like to take one share of Facebook, a Coke, and a Cheeseburger.
The 15 billion never made any sense, and as it becomes clearer that social networking won’t monetize well their perceived value may quickly drop below a billion, though that would still be one heck of a payday for Mark Z and the gang.
I left college long before facebook started. But I’m now realising how much of an absolutely incredible business tool it is. A HUGE amount of my contacts are on facebook and use it regularly. So do I.
I think it could become orders of magnitude more useful than linkedin (and linkedin is useful).
Those who expect facebook to fade away are sadly mistaken. Facebook is going to become one of the most important tools on the internet if they continue in this direction.
@ arrington.
I wage a bet. And the bet is…Place a poll on TC about the ability for Facebook to become dissolved by Google within the next two years because of open standards and DP. If we win (=jason and glu), we get to write a guest column for TC about our thoughts on it as welll as two TC 50 tickets. If you win, we will personally make ourselves available for a public flogging outside of your house. Let us know.
Mike, isn’t it against the law to publicly solicit the sale of stock even in a private company? Especially to unaccredited investors (beyond the first 35) and without the appropriate disclosures.
Asif
http://www.SINLetter.com
a $15B evaluation is just laughable
ok, revenue is a problem right now…but this is solvable. Facebook is a great company. Anyone who says otherwise is simply jealous of what they have and will accomplish.
I believe they have some really talented engineers and they move quickly.
Notice… They haven’t announced anything major in a while. Last time that happened they announced the facebook platform. I think we will definitely see an iPhone app along with some killer location based services from facebook SOON.
@30
right…the keyword is “will” - and their big evaluation is based on “will” become.
But, big but, they’re not there yet.
Like the big valuations of the late 90s…they’re based on what they “will” become.
I don’t like FB at all, but I do pay attention. To add to what Sam said (I discount the significance of an iphone app), they are also adding a micro-payment platform.
It isn’t clear what the implementation will look like, but an FB-based payment system will be huge. Can’t tell if it will be international or not, but F8 conference is in july.
I haven’t read all of the comments, but thought I would mention the obvious. The employee stock being sold at a 3 billion dollar valuation is common stock (i.e. no anti-dilution, no full ratchet, no preference). The stock that sold at a 15 billion dollar valuation is preferred stock. Common stock is not worth as much as preferred stock. As time goes on the two will reach parity, but for now I wouldn’t pay for common stock in Facebook at a 1 billion dollar valuation. I know you understand this, but a lot of people seem to be confused.
There’s this interesting group on Facebook: 500 active FB users who want each invest at least USD 1,000! Isn’t that great?
On more paranoid note, the timing is suspiciously close to facebook platform reset on 7/15. considering radical nature of the changes its 50/50 chances of crashing developer community and inescapably leading to lower valuation. may be somebody looking to exit while there is still a perception of higher value? Events after reset are certainly going to be “interesting”.
@20: could it be that greed, pomposity, and obnoxious lack of skill doomed Facebook to never reach any actual valuation? I mean $15B, or $3B is monopoly money until either an IPO or a sale, and it seems like the time for either is long gone.
As long as there are VCs who are as clueless as Arrington to keep investing in FB it’ll stay afloat, but aside from that one time strategic advertising deal with Microsoft will FB make any more money?
Sam: A company without revenue is defined as a hobby. You have to actually make money to be a company.
Huh. ROFR=Right Of First Refusal for those of you less financing savvy like me. I had to google it. http://www.startupcompanylawye.....agreement/ looks like they have a nice write-up on it.
Basically, if you get an offer to buy your stock, the company gets first shot and if they don’t, the preferred shareholders can also take a shot.
alexander - most of the difference in value between common stock and preferred is simply a fiction created to allow stock options to be issued to employees at very low prices. Sure the liquidity preference makes a difference in some sales, but the trend over the last couple of years has been to move to 1x. it doesn’t justify a 15x difference in value.
The 1x is due largely to the way tax laws are being interpreted; frankly it annoys me, but it is too hard to argue with the valuation ‘experts’. Anyway, if the company is successful I agree there won’t be a difference in value, but lets assume the next round IS a down round and the preferred guys take a haircut. I don’t know the details of the anti-dilution provisions of this deal, but I bet the common would take a much nastier beating.
This could be great news! If these shares for sale are distributed to enough individuals, I think 500, then facebook would have to report as a public company.
What would be most interesting to know here, is Who is selling off.
As stated above, if if it’s ConnectU guys, then maybe a buy.
But, if it’s TOP Executives & Zuckerberg himself, i would be worried and would steer clear! Maybe they know something we do not?
I use Facebook all the time. It is a cool apps but I can’t think of any way it is worth $15 billion. $6 billion tops.
Facebook is such a powerful tool, that it is worth MUCH more than $15billion. Based on my calcualations, I would say it is worth at minimum $170 Billion. Facebook will become the defacto repoistory of the information for every individual on the planet. You cannot put a price on the sum of every human being’s DNA, but if you did, I would say it has to be woth at least $170 Billion today, and probably MUCH more in the next 10 years.
Mark Zukerberg will eventually become the most powerful man in world history. Facebook will become the bible of the new millenium, and Zuckerberg will be the messiah.
Update: this stock has been sold.
LOL @44
Correction, please be accurate with Zuckerberg’s spiritual leanings.
He will be the Buddha of the new millennium.
Here’s a piece all social network operators should be aware off. Got it from a newsgroup on usenet. There’s Part II from the link below.
http://www.techxiety.com/techx.....-know.html
having been on the internet since it’s early days back in 92, time and time again i’ve seen websites that have come and go, re-come and re-go again and then eventually petered out because of non-sustainable halo-inspired business models. Sites that have had ridiculous valuations back during the dot com 1.0 days ended up on sale on ebay, liquidated, bought by vulture capitalists, delisted from stock exchanges across the globe late 2000-01.. they all missed the boat because of many diff reasons. Facebook is or going to be the king of social networking all because they are gaining traction in their ‘connecting or catching up with friends + applications within a walled garden’ approach. my advice.. get your lucrative exit now while u r still ahead of the game.. or should i say before the next gen social network comes along…
When there are 7.5/10 internet users in Asia (largest group comprising of 40% of world internet users) that have never heard of Facebook based on localised polls, that’s when u should start worrying about being the king of social networking. Read below too.
http://venturebeat.com/2008/06.....nce-again/
Today, i’d give FB tops at $2.5B evaluation and dipping (hint: global economic slowdown on the way) . But nonetheless, kudos to FB & team for such a great achievement in such a short time.
somebody should buy it at at a $3b valuation and sell it in lots of 1-100 shares at a $15B valuation.
here’s an article that discusses why the facebook apps platform will continue to slow down:
http://zooie.wordpress.com
i agree. not good times for facebook.
wow, am i disappointed with the caliber of comments about this post. misleading, immature comments and spam - is this what TC is coming to?
as an ex-facebook employee and someone who has received numerous inquires about my holdings, i can tell you that it’s not unusual for holders of common stock in a private company to seek to diversify, especially after a company has risen so quickly. i’m not a facebook cheerleader, but i’m left to wonder what the “story” is here - yes, facebook wants to keep the common price down so that they can attract and hire talent. yes, if someone now has 90% of their net worth tied up in Facebook stock, they’d like to sell some. I don’t think it’s necessarily an indicator of trouble for the company - it’s more like prudent financial sense for the shareholder.
On the other hand, if people who are “in the know” are dumping everything they can (as we see often with public companies), then there may be something to take note of.
What I do know is that there is a significant amount of Facebook common stock floating around, both in my account and elsewhere, and while I think the company remains the most exciting Web consumer play out there, it certainly crosses my mind to sell a little bit so that I can just be a smart, prudent investor.