Facebook’s Pre-IPO Buyers Burned Too

“As shares of Facebook Inc. slid from the IPO price, one group of well-heeled investors was arguably more surprised than most: those who bought the stock months before on lightly regulated private exchanges.

The paper losses could make investors wary of paying top-dollar for other private companies and going through the often-complicated process of investing on the “secondary market,” experts say.

Companies often issue stock to employees before going public. The secondary market brings together shareholders looking to cash out with buyers betting the stock will soar after an IPO…

But for some institutional investors and wealthy individuals who dabbled in the secondary market for Facebook shares, what once looked like a can’t-miss opportunity has been, well, a miss. Facebook’s stock reached as high as $44.10 in March on SharesPost, a secondary market run by SharesPost Inc. of San Bruno, Calif. After going public in May on the Nasdaq Stock Market at $38, Facebook was at $26.89 in afternoon trading on Wednesday…

Shares of other private tech companies are starting to see the fallout from Facebook’s drop. Twitter shares peaked at $21 a share in April, but sold at only $18 a share in an auction immediately after Facebook’s IPO, according to Sam Hamadeh, CEO of PrivCo, a private-company data provider.

Among the frustrated investors is Michael Moe, CEO of GSV Capital, which runs a fund with a $200 million market value that invests in pre-IPO companies. Mr. Moe in 2011 bought Facebook shares in two transactions at an average price of around $29, but said he and other investors will be more cautious going forward.

“You’d be foolish not to look at this and ask ‘How does this adjust your thinking?'” he said… ” – Joe Light @ WSJ

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1 comment
  1. Chuck said:

    If you bought FB stock at $44.10, you deserved to lose every single penny you lost and then some. A fool and his money are soon parted.

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