Private Shares

Buyers are Paying a Huge Premium on the Stock of Private Tech Companies

mark zuckerberg thanks Buyers are Paying a Huge Premium on the Stock of Private Tech CompaniesCompanies that facilitate the trade in private shares of tech companies like Facebook and Twitter also provide third party research so that buyers can get a sense of what experts think these firms are worth. It’s important, since the financial health of these companies is pretty opaque. A few figures on revenue and profit margins have circulated, but there is no way for an individual investor to confirm these numbers.

Not surprisingly, companies like Facebook command a pretty huge premium. On Sharepost, two of the three estimates peg the social networks value between 10 and 13 billion dollars. In the meantime, the stock is fetching upwards of $70 billion at auction. And these aren’t just investors hoping to capitalize on flip when the company goes to IPO. “Want to purchase 1000 shares at $30…kids college fund,” writes one Sharepost user. 

As Bloomberg Businessweek highlights in a big feature this week from Brad Stone, Facebook employees trying to buy up shares on the private markets have been fired, as the company attempts to prevent any appearance of impropriety or insider trading. Meanwhile big angel investors like Chris Sacca and Ron Conway are feuding over access to shares of companies like Twitter, which isn’t close to being a profitable business. “Sacca’s sympathizers contend that Conway has personally threatened to raise roadblocks in the careers of former Twitter employees if they did not sell their shares to his fund,” writes Stone.

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