Offers to buy Facebook common stock have surged to $32 per share on SecondMarket, a marketplace for the buying and selling of private company stock. That offer values Facebook at roughly $14 billion.
The last time we checked in, in December 2009, private sales were occurring at $25 per share, or a $11 billion valuation.
This new $32/share bid price doesn’t represent an actual sale, though. There are currently 20,000 shares of common stock for sale with an asking price of $40 per share (or a $17.6 billion valuation). But it does show that someone out there is willing to buy those 20,000 shares for $32/each. So far, the seller hasn’t bitten.
It was only a few months ago that employees and other common stockholders sold $100 million of their stock to DST at just a $6.5 billion valuation. That sale was oversubscribed and some stockholders weren’t able to sell. With the benefit of hindsight, they were the lucky ones.
If a sale occurs at $32 it will be the closest the company has come to its $15 billion valuation that Microsoft paid way back in late 2007. In May 2009, DST purchased $200 million in Facebook preferred stock at a $10 billion valuation.
Confused? It’s not that complicated. Employees and advisors get common stock, which trades at a lower valuation. Venture capitalists buy preferred stock which has additional rights and privileges attached to it (particularly a liquidity preference, which lets those venture capitalists get their money back before the common shareholders get their share).
But when Facebook goes public, all preferred stock will likely convert into common stock at a 1:1 ratio, and those additional rights are stripped away. Most of the difference in valuation is just due to complicated tax rules which let startups give employees low priced, tax advantaged stock options to incentivize them to join the company before it goes public.