Facebook insider trading pumps IPO

Privately held shares are being swapped so frequently that regulators are paying attention.

By Kim Peterson Dec 29, 2010 12:17PM
Credit: © Paul Sakuma/AP
Caption: Facebook CEO Mark Zuckerberg talks about the new email service at an announcement in San Francisco, Monday, Nov. 15, 2010Facebook may pooh-pooh a public offering, but its pre-IPO shares are getting traded with such ferocity that it may have no other choice, The New York Times reports.

This is the same problem that forced Google (GOOG) into an IPO perhaps earlier than its founders wanted.

Facebook has issued privately held shares to employees and other investors, and those shares are being traded so much that the Securities and Exchange Commission has asked Facebook for more information about what's going on. The SEC has made similar requests in to Twitter, Zynga and LinkedIn, the Times reports.   The issue is a federal law that limits private companies to 499 shareholders. If a company hits 500 shareholders, it must register its private shares and disclose its financial results, the Times reports. Post continues after video:
Facebook has no desire to make those financial results public, and it got permission from the SEC two years ago to issue restricted stock to workers without registering the securities.

But former Facebook employees and investors are selling their shares on private exchanges, the Times reports, often to wealthy speculators.
As Facebook shares continue to get bandied about, the company gets ever closer to hitting that 500-shareholder mark. And that could force an IPO faster than the company intended.

Google went public the year after it hit the 500-shareholder mark, the Times reports.

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2Comments
Dec 31, 2010 6:14PM
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Wow Cel1, you are a huge loser.  I hope you get counter-sued and bankrupted.  Stop pretending you are some important celeb, or that anybody wants to see your fat **** on a computer screen.  Trust me, we don't.
Dec 29, 2010 4:24PM
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personally, I hope they go under. I have had my photo posted on facebook by another person when I had specifically asked that individual to no longer do things like that. I am going to sue him because he did not have permission and I believe there may be a way to bring criminal charges as well and if so, I will do that. facebook needs to be more responsible for the actions of the users.
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