Facebook halts secondary share trading, about to hit the road

29 Mar 2012

Facebook’s decision to halt trading of shares on secondary markets is a necessary calming manouvre intended to pave the way for the necessary investor road show ahead of May’s IPO.

It was widely reported last night that Facebook was halting trading of shares on secondary markets like SharesPost and SecondMarket Inc as it prepares for the IPO.

The move is a necessary one in the so-called quiet period leading up to the flotation.

But it will be anything but quiet as Facebook’s top brass parade through a seemingly never-ending line of institutional investors who will ultimately decide the success of the IPO.

In its filing in February, Facebook revealed it hopes to raise US$5bn in an IPO in early May. Its SEC filing, Facebook revealed that in 2011 it achieved revenues of US$3.7bn, up from US$1.9bn a year earlier. It derived a net profit in 2011 of US$1bn, up from US$606m last year.

Facebook has total assets of US$6.3bn and liabilities of US$1.4bn.

However, the most eagerly anticipated IPO of the decade could be mired by the actions of Yahoo!, which chose its timing well to hit Facebook with a claim that the social network has been infringing its patents. Yahoo! alleges Facebook infringed patents relating to patency, online advertising, customisation and messaging.

In a filing yesterday, Facebook warned that an unfavourable outcome to the patent litigation could hit its business materially.

The social network counts around 850m users worldwide but it is expected to breach the 1bn-user milestone later this year.

So who gets what if IPO is a success?

So who gets what when Facebook IPOs in May? Employees of Facebook hold 30pc in the company while founder Mark Zuckerberg holds 24pc of the company’s stock.

Ireland’s own Bono from rock band U2 is set to enjoy a Beautiful (pay) Day when Facebook goes public. The rock star is one of the lead investors in Elevation Partners, a venture capital firm that spent more than €156m for a 1.5pc stake in the social network. Elevation has seen its stake increase more than sevenfold in just more than two years. The shares are now worth between €1.1bn and €2bn.

Other investors include Digital Sky Technologies (10pc), Accel Partners (8pc), Dustin Moskowitz (6pc), Eduardo Saverin (5pc), Sean Parker (4pc), Goldman Sachs clients (3pc), Microsoft (1.3pc), Peter Thiel (3pc), Greylock Partners (1.4pc), Meritech Capital Partners (1.6pc), Chris Hughes (1pc), Li Ka-shing (0.75pc), Interpublic Group (0.5pc) and Goldman Sachs (0.8pc).

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years