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12/28/2010
12:13 PM
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Facebook Value Leaps 56% To $41.2 Billion

The social media giant led strong gains among privately held social media companies, including Groupon, Zynga, and Twitter, in the second half of 2010, finds analyst study.

Flock Browses All Your Social Connections
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Slideshow: Flock Browses All Your Social Connections
Privately held social media firms are gaining in value, with rock star Facebook now worth more than better-established publicly held businesses such as eBay and Yahoo, a report shows.

In the past six months, Facebook's value grew 56% to $41.2 billion, according to securities firm Nyppex. The value of 11 privately held Internet social networking businesses increased by a total of $20 billion -- or 54% -- between June 30 and December 1, the firm determined. Groupon, Zynga, and Twitter all are valued at more than $2 billion, Nyppex said.

At $41.2 billion, Facebook is worth more than giants across many industries, including Viacom, CBS, and Time Warner, said Laurence Allen, managing member at Nyppex. The securities firm valued eBay at $32.8 billion and Yahoo at $18.4 billion. Google -- valued at $149 billion -- and Amazon -- at $73.5 billion -- still lead the pack. Zynga and LinkedIn's values dropped slightly, Nyppex said.

"We try to be students of venture history, and we think this is a milestone event that's taken place in the last six months," Allen told Digital Trends.

The companies in the study are privately held, with no immediate plans to file initial public offerings (IPOs). Nyppex generated the research for those interested in acquiring a piece of Internet startups, typically buying stock from existing shareholders, such as employees, in deals called secondary transactions. The volume for secondary-transaction deals could hit $4.9 billion this year, as companies delay IPOs, but investors pursue partial ownership of startups, Allen told Bloomberg.

"This trend will create even more pressure on portfolio managers to evaluate how to participate in growing private companies," he told the news organization. "We get new buy orders weekly from institutions trying to buy secondary shares in private social-media companies for the first time."

Driven, perhaps, by this increased volume, the Securities and Exchange Commission is scrutinizing trading in private companies, the New York Times reported on Monday. The agency has, in fact, sent information requests to a number of participants in the buying and selling of stocks at Facebook, Twitter, Zynga, and LinkedIn, the Times said, citing two people with direct knowledge of the inquiry.

Although details of the inquiry are limited, several securities lawyers said the action could be related to determining the number of shareholders at these social media companies, the Times said. As long as the businesses have fewer than 500 shareholders, they do not have to disclose financial results to the public. As soon as a company has 500 or more shareholders, SEC rules dictate a company must publicly share its financial results.

In March, Facebook stopped allowing current employees to sell stock. Now only former workers can offer their stock for sale. The company also put into effect an "insider trading" policy, and gives newly hired Facebook employees restricted stock that only have value if the company goes public, according to the Times.

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