It seems this is really an internal problem, but could this mean that Facebook has been overvalued all along? Is this drag down from the overall economy or a Facebook-specific situation? Is the site losing growth-potential? These are all important questions, because it seems Facebook has two choices: a Google-like behemoth that dominates social-networking, swallowing up competitors and innovating fast enough to keep users from migrating OR a regular, pretty good social networking site that has a loyal base but whose aspirations do not lie outside its modest URL. I think Facebook wants the former, but can it get there? Is its business versatile enough?
Insiders are selling stock in the company—and getting a fraction of the price it appeared to command last year
Insiders at Facebook are selling stock in the social-networking giant, and the prices they’re getting for their shares suggest the sky-high valuation backers once placed on the company may prove unrealistic.
Just a few months ago, Facebook was widely viewed as the next Google (GOOG) in Silicon Valley. Microsoft (MSFT) bought a small preferred equity stake last October that the two companies said implied a valuation of $15 billion for all of Facebook. Shareholders in the still-private company appeared to be setting themselves up for a blockbuster initial public offering.
The prices for Facebook shares in these transactions reflect a total valuation far lower than $15 billion. Albukerk, the founder and managing director of EB Exchange Funds, says that two current directors and one former executive recently contacted him about selling some of their stock for prices implying a $5 billion valuation. He also says that two investment firms have bought large chunks of Facebook stock at a valuation of about $3.75 billion. Hans Swildens, founder of Industry Ventures, a San Francisco firm that buys stock in private companies, says his firm has been talking with a growing number of Facebook employees. “There’s a lot of interest among people to sell shares,” says Swildens.