Yeah, you should be sweating (Photo: scrapetv.com)

Yesterday over drinks, we asked an angel investor if he thought Gilt Groupe would actually go public this quarter or next year, as planned. Fat chance given the post-Facebook IPO market, he replied. (Stronger language was used.)

Today, Bloomberg offers a must-read, in-depth investigation into just how cynical Facebook was in the lead-up to the IPO, including obscuring material information on risks demanded by the Securities and Exchange Commission. Those vulnerabilities, such as difficulties in monetizing mobile, decelerating revenue and dependence on Zynga, became painfully evident to shareholders who have watched what was supposed to be "the IPO of the Century," drop in share price from $38 down to $19.69 as of this afternoon. 

Lest you think it's merely the vagaries of the public markets, Bloomberg outlines how Facebook's pricing structure played into that (emphasis ours):

Despite the cautionary signs, on May 15 Facebook and Morgan Stanley executives raised the asking price to a range of $34 to $38 from $28 to $35. A day later they also increased the number of shares being sold by 25 percent to 421.2 million. That was an effort to create a stronger buffer against a price decline in August when insiders and early investors were allowed to sell their stock, said one person familiar with the matter. The lock-up period was for only three months, unusually short compared to the average six months.

Some of the culpability lies with the SEC--specifically, the agency's policy that that makes a company "responsible for its own disclosures," which allowed correspondence from the SEC demanding answers about risks to go unpublished until a month after the IPO.

A dozen letters, published a month after the May 17 IPO on the SEC’s website, depict a management team hesitant to disclose information and still guessing at even rudimentary aspects of its business just weeks before the company held the largest-ever technology initial public offering.

Of course Facebook's decision not to delay the IPO after significant, last-minute changes in forecast was "almost unprecedented," analysts told Bloomberg.

There was also the hysteria leading up to the IPO. In July 2011, trading on SecondMarket suggested that Facebook had a market cap of $85 billion. Its current market cap is $42.2 billion.

While the SEC continues to conduct an “in-depth review of all the participants” in the IPO to determine if anyone left out or lied about material information, Bloomberg has outlined some of its known sins against shareholders.

In one instance, Facebook cited Nielsen as a source for statistics about social ads that actually came from Facebook's marketing materials. And it wasn't until an ultimatum from the SEC that the reference was removed. Then, in addition to Facebook's troubling uncertainty over the number of mobile users (the SEC noted that they were counting some users twice, putting total user count into question), Facebook also seemed clueless as to where in the world their users were coming from:

"The company counted as Canadian many BlackBerry users around the world because the servers are based in Canada."

But the most egregious manipulation--as Bloomberg covers in great detail--involved who was told what and when, bringing us back to the impact of Facebook's IPO on the overall market. On May 9th, the same day Facebook released a "pivotal" disclosure "to investors cautioning about the growth in mobile users exceeding growth of ads," Zuck, CFO David Ebersman, and COO Sheryl Sandberg were on the road show hyping the stock. Meanwhile:

Investor relations staff at Facebook began placing a battery of calls to equity analysts with a dour warning: sales for the second quarter and full year wouldn’t likely match its earlier guidance, according to people familiar with the situation.

Analysts adjusted their forecasts down and shared them verbally with their firms’ institutional clients, whose demand for the stock sagged as a result, people with knowledge of the matter said on May 10. Sharing that information only with institutions isn’t unusual, and it’s legal as long as they don’t do it in writing.

But it wasn't just institutions who were investing.

Yet Facebook wanted the larger retail allocation to let its users take part in the IPO, the person said. In the end, 25 percent of the shares sold at the IPO were allocated to retail investors, other people have said. That exceeds the average amount of 15 percent.

It should have been enough to delay the IPO, Luigi Zingales, a finance professor at the University of Chicago’s B-school, told Bloomberg.

Still, said finance professor Zingales, “The fact that some institutional investors got access to a company’s information that was not available to ordinary investors creates the perception that there are two sets of rules and increases the mistrust in the market.”

So who emerged unscathed from this mess? Take a guess.

There were no headaches for investors who bought equity while Facebook was still private and were able to sell at the $38 IPO price. Goldman Sachs sold 24.3 million shares, which raised $924 million at the IPO price, doubling its original investment. Greylock Partners made 18 times its initial investment, selling 7.6 million shares for $289 million. Microsoft sold 6.6 million shares, which raised $249 million, more than quintupling its initial stake.

Stay tuned for more fallout later this month "when holders of more than a billion shares, many of them employees, will be permitted to sell."

Hang in there just like that kitten on the poster, Mr. Zuckerberg. (flickr.com/gpaumier)

If you felt The Force shudder and ripple sometime tonight it may have been due to the Earth-shattering report that Facebook's C.E.O. Mark Zuckerberg has left the world's 40 richest people list. We would pause while you gasp and sob but it's scab-pulling time regarding the bad news for the youthful billionaire--and anyway, we think Zuck can handle the pain:

According to the Bloomberg Billionaires Index, Zuckerberg dropped out of the top 40 ranking when shares of his newly-public company hit a low of $28.84 after trading on Tuesday. He was replaced by Mexican billionaire Luis Carlos Sarmiento.

The Facebook CEO's fortune fell to $14.7 billion on Tuesday from $16.2 billion on May 25,Bloomberg reports.

As the A.P. and CBS noted, Mr. Zuckerberg isn't the only young billionaire to suffer this dreadful fate--fellow Facebook billionaires Dustin Moskovitz and Sean Parker have been slammed by the drop in Facebook stock as well.

Mr. Zuckerberg has made no public comment on his fall into non-top-40 billionaire ignominy, but on his behalf, let's remember him in a better, happier time, when he was photobombing a Chinese cop propaganda film documentary.

*UPDATE: Turns out we missed a relevant post from Mr. Morin on our first pass. We've updated the slideshow accordingly. Let us know if we've missed anyone else--tips@betabeat.com.

>>Check out our liveblog of the Facebook IPO Day 1>>

The crowd outside was not that much larger or rowdier than it usually is in Times Square. The majority of people stationed outside NASDAQ were press, save for a few bystanders gawking at the camera equipment and a gaggle of baffled tourists milling about.

We passed by two blonde twenty-somethings, tourists from Germany, who were wondering what exactly was going on. "It's a business story," clarified our news editor. "Oh, okay," they said, nodding, still looking quite confused.

One man, a "semi-homeless private citizen" named Peter James, stood outside the stock exchange with a sign that read, "Facebook millionaires, please help the N.Y.C. food pantries."

"I thought this would be a good opportunity to bring to the attention of these new millionaires today that New York City food pantries, operated by churches and synagogues, are pretty much depleted in their food supplies," Mr. James told us. "Because of the economic recession these past few years, they're seeing a 200% increase in people needing food, and a lot of these shelters have no baby food. All they're going to have left is basically rice and cornmeal. So maybe some of these New York City millionaires will help contact a church or a synagogue and see if they need any food supplies."

By the time we'd finished talking to Mr. James, most of the gawking had petered to a trickle. Only press remained. We sidled up to the Rickshaw Dumpling truck, which was stationed directly outside of NASDAQ. "Do you have a minute to chat?" we asked the two girls serving the dumplings. "Do you want to?" one asked the other. She shook her head no. "Sorry," she replied, not looking very sorry at all.

Photos by Megan McCarthy.

The man of the day. (Photo: flickr.com/rubygoes)

And that's all she wrote! Enjoy your weekend, try not to spend it on Facebook. 

6:06 p.m.: Cue the speculation on the next Facebook to go public. Over on Quora, Dropbox and Box.net are two names that come up repeatedly. But Dan Primack thinks it might be the enigmatic Palantir. It certainly has a tagline that promises a pop. "We solve the world's biggest problems," Palantir declares boldly on its landing page.

5:59 p.m.: The debate on whether FB stock was priced correctly or not rages on.

@karaswisher @danprimack not the right price if bankers had to prop it up. that's not the market price. (but probably pretty close)

— chris dixon (@cdixon) May 18, 2012

5:55 p.m.: Facebookers, on the hand, are doing just fine, at least judging by their beamers.

At a woodside gas station near Facebook.Employee (shirt and backpack) just pulled up with a brand new M3. You can't make this up,

— Jeremiah Owyang (@jowyang) May 18, 2012

5:41 p.m.: Bloomberg reports that the SEC is investigating the trading delay. "Staff will review the incident with Nasdaq to determine cause..." LOL, says NYSE. More bad news for NASDAQ, Bloomberg also says traders didn't get order confirmation for $FB shares for as long as 4 hours.

Hearing that many traders STILL have not gotten order confirmation on $FB trades made during today's IPO. #nasdaqfail

— Sam Gustin (@samgustin) May 18, 2012

5:15 p.m.: Nice charts from Josh Brown and Joe Weisenthal describing the battle to keep Facebook from falling below the offering price of $38. "It's very typical for underwriters to step in and stabilize the price right around the offering number," Charles Jones, professor of finance and economics at Columbia Business School, told The Observer. "It's fairly par for the course in a cold IPO."

4:16 p.m.: More than 560 million Facebook shares traded (electronic) hands today, and while high volume is not atypical for an IPO, today's total may indicate the divide between Facebook bulls and bears.

“Disagreement tends to cause volume—it indicates there are buyers and sellers," Robert Whitelaw, finance department chair at NYU’s Stern School of Business, told The Observer. "If everyone agreed, you could get a huge price shift and almost no volume. The price would almost automatically move. That wasn’t the case here.”

“This wasn’t quite a resounding success,” he added.

4:00 p.m.: Ding, ding, ding, ding! At the end of regular trading hours, Facebook closed at $38.18, up 0.47 percent from the start of trading. That sound you're not hearing is the glaring absence of a pop.

3:55 p.m.: Zynga investors are likewise not having the best day.

Tears With Friends RT @ReformedBroker: RT @howardlindzon: Zynga breaking $7...it's panicville $znga $sweb

— George V. Hulme (@georgevhulme) May 18, 2012

3:52 p.m.: About 8 minutes to go until regular Market Hours end on Nasdaq and Facebook is down to $38.01, up a hair from an earlier dip.

To put it another way: Virtually every single investor who bought Facebook shares today has already lost money.$FB

— Dennis K. Berman (@dkberman) May 18, 2012

3:39 p.m.: Did the Facebook IPO just ruin Silicon Valley as we know it? So argues serial entrepreneur and Berkeley and Stanford professor Steve Blank over at The Atlantic. This whole event the tech world is celebrating? It's tantamount to "dancing on its grave."

"For Facebook, it's spectacular. But Silicon Valley is screwed as we know it.

If I have a choice of investing in a blockbuster cancer drug that will pay me nothing for ten years,  at best, whereas social media will go big in two years, what do you think I'm going to pick? If you're a VC firm, you're tossing out your life science division. All of that stuff is hard and the returns take forever. Look at social media. It's not hard, because of the two forces I just described, and the returns are quick."

3:26 p.m.: Back to the tennis match: The stock is down below $39 (would the underwriters let shares fall below the offering price of $38?), and this is feeling more and more like a failure. Yes, shares opened up 11 percent, proof you might argue, that the offering was priced correctly. But from the delayed opening (we get that the trading volumes were massive, but...that was a surprise?), to the modest pop (hardly seemed worthy of the biggest tech IPO), Facebook and its investment banks are going home with pockets filled, but probably not incredibly happy...

1:45 p.m.: Celebrity short-sellers? They happen. New England Patriots all-star Wes Welker is advising his followers on how to handle the Facebook IPO:

You may want to consider how many times this man has been concussed before enlisting his financial advisory services.

1:30 p.m.:  A tipster IMs in: "saw one of the winklevii in the gym on monday, btw." No word on how despondent it was. Also, from the genius pit at The Daily Beast, a slideshow of Mark Zuckerberg photoshopped into fashionable clothing that aren't hoodies. That actually happened.

1:15 p.m.:  By the way, with our readers' help, we've created a Spotify Playlist just for Facebook's IPO day! Special thanks to MetsGirl blogger @CarynRose, Jeff Rosenthal of It's The Real, Gizmodo's Sam Biddle, one-half of Fuck Yeah Menswear and Complex editor Lawrence Schlossman, and one @folinsbeek. This is kind of wonderful and awesome:

1:00 p.m.:  And we're now almost half way through Facebook's first day of trading, and the 'Book is still down. ABC News anchor Dan Harris picked up one share, and isn't too happy about his results so far:

Meanwhile, you should know: We reached out to The Brothers Winklevii last night for an IPO gameday interview. What'd they have to say?

Hey Foster,

Thanks for your email and interest. We are not doing any press or media tomorrow so unfortunately will be unable to participate.

Best,

Cameron

Sent from my iPhone

Womp-wommmmmmmmmmp. What, guys, couldn't take time off of your busy Olympic training schedule to satiate the needs of a bloodthirsty and schadenfreude hungry press who wants to know just how much suffering you're experiencing at this very moment? Ridiculous.

12:30 p.m.: Mark Zuckerberg's shares are now worth almost $21 billion. It would be cool if they get to $28 billion, which would be a billion dollars for every year he's been alive.

12:19 p.m.: NASDAQ is still seeing some hiccups in electronic trading, the Wall Street Journal reports. And to think, this morning CEO Bob Greifeld was so happy.

12:13 p.m.: Occupy Wall Street weighs in.

#facebookIPO is again building on the backs of the public. The company should be owned by the users not the usual youtu.be/rpbRXXntGM8

— Occupy Wall Street (@OccupyWallSt) May 18, 2012

12:01 p.m.: Share price is getting off the $38 floor; trading with a 39-handle (we've always wanted to write that), shares are down in the 5-6 percent range from the $42.05 open. Not much of a pop!

11:49 a.m.: Facebook is very close to the opening price at $38, dipping as low as $38.07. Time for the underwriters to start working the phones, Bloomberg says.

But guess who took a hard dip? NASDAQ's own share price, after the long delay in opening.

(Source: CNBC)

11:45 a.m.: 

@felixsalmon a 10% pricing is the minimum to indicate respectable demand. Pricing that's too high, like this, indicates company greed.

— Heidi N. Moore (@moorehn) May 18, 2012

11:40 a.m.: Stock listing down around $40, much too sane for our liking. You mean we busted out in hives for a mere $100 billion valuation? Meanwhile, Bloomberg reporting that Facebook has been named in a $15 billion class action suit, with plaintiffs alleging that Facebook invaded their privacy by tracking Internet use.

11.31 a.m. Hovering around $42.00. "We are all very rational these days. Where is the hype?"

11:30 a.m.: IT BEGAN! Yahoo, "Life as we know it has just changed."

11:17 a.m.: The commentators at Yahoo Finance are flummoxed as to the reason for the delay. "I don't know why this would be?" host Jeff Macke wondered. "This is trading at the NASDAQ, it's all electronic trading," Matt Nesto said. "They should have it open right now, I don't know why they don't have it open right now... I think maybe there's not as much demand as they thought there would be."

11:13 a.m.: The opening is delayed! No opening yet! You can watch live coverage at Bloomberg, Yahoo and Reuters. Bloomberg is saying the stock will start trading at 11:15.

11:02 a.m.: Uh oh, the NASDAQ livestream is down. Trading is also delayed by five minutes, according to CNBC, so shares should officially be released at 11:05a.m.

11:00 a.m.: The Observer's executive editor Aaron Gell is doing excellent FB-related standup on Twitter right now.

10:46 a.m.: A good thread at Kid Dynamite’s World on the success (or lack thereof) investors had getting shares allocated at E*Trade. Kid Dynamite asked for 10,000, got 100 (doh!); from the comments, his was not an atypical experience. That's going to feel a lot worse when all hell breaks loose in 14 minutes...

10:30 a.m.: Check out some sweet $FB-related tweets.

10:24 a.m.: And here is video of that remote bell opening, starring some very excited Facebookers:

http://www.youtube.com/watch?v=0Z3UoO5xK0A&feature=youtu.be

Note the moment, 30 seconds in, when Zuck very nearly knocks over the podium. It's okay, we'd be feeling a little light-headed, too. And was Sheryl Sandberg actually bouncing up and down?

10:21 a.m.: In Europe, pre-market bids hit 58 euros a share, or $73.65, enough to push the valuation of the company to vomit-inducing heights of more than $200 billion. Seriously, pull over. We may be sick.

Screen shot from Zero Hedge:

10:04 a.m.: Well, well, well. Look what Zuck posted on his Facebook wall:

TechCrunch explains how they did it. (Apparently something so simple required a fair bit of coordination.)

9:58 a.m.: Waiting for Facebook's fashionably late opening, and wondering what Zuck's worth right...now. Our hoodie-clad hero may not “care about money,” but that doesn’t mean we can’t gawk. Mark Zuckerberg owns 28.2 percent of Facebook, according to the website whoownsfacebook.com; $38 share values the IPO at $104 billion, putting Mr. Zuckerberg on a pretty pretty net worth of $29.3 billion. The Bloomberg Billionaire Index’s more scientific methods put the boy wonder at $19.3 billion, slotting him in at 29^th on the list of the world’s richest persons, between candy company heiress Jacqueline Badger Mars and some guy named Larry Page.

9:37 a.m.: The tour of Facebook's Midtown office this afternoon, part of an Internet Week initiative called WalkaboutNYC, is sold out. Here's what you're missing:

(Photo: WalkaboutNYC)

9:17 a.m.: It's a bittersweet day for SecondMarket, which loses one of its most profitable offerings as Facebook stock moves from the secondary markets to the primary ones. But the company still wants to be in the conversation. We just got an email blast directing us to a history of Facebook on Second Market. Facebook's price per share was $3.50 when an employee first approached SecondMarket to sell. Ha! Ha!

9:05 a.m.: SO EXCITED!

8:57 a.m.: Facebook has announced its shares will debut at $38, substantially higher than Groupon's $20. It's all hands-on-deck across the web as journalists and publicists jockey for airtime. As expected, Mark Zuckerberg will not be in New York, but will ring the NASDAQ opening bell remotely from Palo Alto, a symbol of the enormous power he will accrue and may exercise with a single flick of a switch, as Facebook takes over the world. Trading opens at 11 a.m., because Facebook is special NASDAQ opens trading on IPOs later in the day, to give them their own special time. Henry Blodget returns to the spotlight as the prodigal pundit reformed, pooh-poohing the prospect of buying into Facebook as a regular ol' investor. "This is. Muppet. Bait," he said this morning on CNBC's Squawkbox—savvy investors are gonna hit it and quit it. Gizmodo's Brian Barrett throws another wet blanket.

Friday, early: The blogs put out a wide range of anticipatory crap, such as an image of a Facebook share and a report of a poster at the Facebook Toronto campus that reads "Likers Gonna Like."

You know who. (Photo: flickr.com/prospere)

Facebook's 421,233,615 shares are opening at $38 each [Facebook]

Who's getting paid today? [Fortune]

A picture of a Facebook share [Business Insider]

Facebook had a wacky hackathon last night! [VentureBeat]

How will Europe ever build the next Facebook? [New York Times]

Hong Kong trading platform offers $200 of Facebook stock to new users [TechCrunch]

Ostentatious wealth is frowned upon in Silicon Valley, which likes its millionaires in jeans and hoodies [New York Times]

There are more than 30 banks handling Facebook's public trading debut, for fees of $100 million. What, exactly, do these banks do? The Guardian investigates. [The Guardian]

(elitedaily.com)

As we all know, the Facebook IPO is upon us. One of the things This Means For You: legions of unpaid amateurs are going to be taking to their various social media outlets at their own risk to then endanger the rest of human populace with their patently unfunny insights (as opposed to those like us, who are paid, professional, and therefore, licensed to distribute merely mediocre "humor" ostensibly disguised as insight about the Facebook IPO). And we have now found the single least funny, and moreover, patently unfunnyTweet about the Facebook IPO out there.

Julia Allison, Wired centerfold, friend to Randi Zuckerbergs everywhere, and internet Mothra birthed from the loins of Nick Denton and Gawker circa 2008, please come collect your prize:

Let's take a brief moment to understand why this is so patently unfunny to the point where it is detrimental to humankind:

1. It's difficult to tell if she's joking or not.
2. If she is joking, than she's asserting the idea that the world's media may be over-saturating the news with Facebook IPO talk. Which is both (A) a given and (B) also kind of incorrect, seeing as how this IPO and it's success or failure in both the short and longterm will indeliably change the course of the way people, markets, and companies who are considering the kind of scale Facebook has achieved go about their business.
3. If she is not joking—and at least one person doesn't think she is—than she is clearly disconnected from this world in a way that prompts questions about what remote island she's been living on, and how one manages the work of being on a Bravo TV show from there (what actually may go into doing such a thing). Either way, yes, Facebook has been covered, to be kind, thoroughly much for the last few years.
4. Indignation marked by multiple question marks and exclamation points.

That said, being as unfunny as this is, it could also be her sly way of marking of press for her new show—something on Bravo about the Internet and dating, we presume—in which case, Andy Cohen, you are a terrible genius and we hate you for falling into your trap.

Otherwise, Twitter should learn from Facebook and begin to systematically remove and ban people for doing this like this on their service. Just every once in a while. Like humor eugenics! I'd get in early and go long on that.

A lot of people would.

fkamer@observer.com | @weareyourfek

Not this.

Mark Zuckerberg still hasn't announced which stock exchange he wants to call home, but that hasn't stopped NASDAQ and the New York Stock Exchange from sniping at each other in the press.

Their bitter rivalry is underscored by the fact that their business is "being eroded by other global exchanges and upstart electronic-trading venues," reports the L.A. Times.

According to the World Federation of Exchanges, for example, the number of companies on the NASDAQ is down from 5,556 in 1996 to just 2,669 today. NYSE is facing a similar decline, dropping from 3,025 in 1999 to 2,308 today. Add to that the fact that electronic competitors like BATS and Direct Edge are encroaching on their trading volume. For example, the portion of trading that NYSE manages for companies listed on its own exchange dropped from 76 percent in 2006 down to 29 percent today.

That desperation is evident in the way the exchanges characterize their chances of getting the coveted FB ticker symbol.

The NYSE tries to get people to focus on its blue-chip listings and recent efforts to attract tech companies. Scott Cutler, who heads up NYSE's listings business told the Times:

"The history would go toward Nasdaq, but the trend is toward the NYSE."

The response from his NASDAQ counterpart Robert McCooey [emphasis ours]?

"Just because someone climbs to the highest mountain and shouts that they're the home for technology doesn't mean they're the home for technology," McCooey said. "Just because I could say 'I'm 6 foot 2 and I look like Brad Pitt' doesn't mean it's true."

Zuck, you gotta decide soon. Can't you see it's tearing them apart?

Mr. Silbert

In SecondMarket's 2011 year-end report, Facebook beat out Twitter, Foursquare, Gilt Groupe, Hulu, Spotify, and more as the trading platform's number one most-watched company. Facebook has 14,973 "watchers," almost double the next-closest, Twitter at 7,854. More tellingly, according to public statements from CEO Barry Silbert, 30 percent of SecondMarket's revenue came from trading private shares of Facebook stock, which will soon become a province of the public markets.

But to hear Mr. Silbert tell it, he's coping with the loss just fine. After all, it's not like they didn't know this was coming. As Crain's reports, on Wednesday, Mr. Silbert told the audience at an Xconomy forum on New York's venture capital scene, "We're completely prepared to fill the hole,” adding, “We're hiring, and we have a lot of capital.”

Reached by phone this morning, Aishwarya Iyer, SecondMarket's public affairs manager elaborated on that idea. "We’re in constant conversation with nearly 200 companies, from all across the board," she said. As an example, she noted that SecondMarket is in the process of getting board and management approval to trade private shares with a number of companies, and that the platform is " having liquidity programs with some of them right now."

"We plan on onboarding a big number of them," she added, which would make up for the loss of Facebook trading. Ms. Iyer declined to confirm whether Facebook indeed represented 30 percent of SecondMarket's 2011 revenues, but emphasized new areas of interest, "We’re also working on a world beyond venture-backed companies."

“Facebook put us on the map,” Mr. Silbert admitted at the Xconomy forum, but the company is trying to expand and diversify. Last year, while managing $558 million in private company transactions, the startup also launched SecondMarket for Companies, a tool set that lets private companies interact with potential investors and registered more than $6 billion in buyer interest for companies, including non-venture backed entities like Bloomberg, Burger King, and Cargill, says Crain's.  Surprisingly, foodie favorites were at the top of non-venture backed companies that drew increased interested, with In-n-Out Burger, Dogfish Head Brewery, and Brooklyn Brewery taking the top newbie spots.

Mr. Silbert wouldn't comment on whether SecondMarket will play a part in Facebook's upcoming IPO, but Crain's says he insinuated SecondMarket might be involved in future public offerings from fast-growth startups.

“We're developing relationships with private companies and aggregating interest from investors,” said Mr. Silbert. “You should see us play a role in that process.”

Diligent S-1 readers will have noticed a section in Facebook's filing about secondary transactions, which refers to an ongoing SEC investigation:

The Enforcement Division of the Securities and Exchange Commission (SEC) has been conducting an inquiry into secondary transactions involving the sale of private company securities as well as the number of our stockholders of record. In connection with this inquiry, we have received both formal and informal requests for information from the staff of the SEC and we have been fully cooperating with the staff. We have provided all information requested and there are no requests for documents or information that remain outstanding. We believe that we have been in compliance with the provisions of the federal securities laws relating to these matters.

That paragraph actually refers to a letter sent to companies like Facebook (and SecondMarket and SharesPost) by the SEC last January. At time, SecondMarket offered the following comment:

"We have now received a voluntary request for information from the SEC regarding “Pre-IPO Pooled Investment Funds.”  We are fully cooperating with the SEC in this inquiry.  SecondMarket is a registered broker-dealer, regulated by FINRA and the SEC.  We do not intend to comment further on this matter. "

It's worth noting that SharesPost, another secondary trading platform often mentioned in the same breath as SecondMarket, is not registered as a broker-dealer with the SEC. But those missing credentials didn't stop Bloomberg from adding SharesPost to Bloomberg Terminals as a source of "real-time pricing for private companies."