
Facebook to let employees sell some stock — at internal $4 billion valuation - sanj
http://venturebeat.com/2008/08/04/facebook-to-let-employees-sell-some-stock-options-at-internal-4-billion-valuation/
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netcan
$4b is an awful lot. Especially since any potential business model is still to
be really proven. The sort of targeted advertising they are aiming for is not
necessarily easy to pull off. And I think it will take a couple of years to
prove it either way.

I wonder what this does to their runway?

~~~
joeter
$4b seems much too high to me as well. facebook has two main values that are
only valuable due to high number of users.

1- source of contact - substitutes include: old aol, aim, email, ichat, ect

2- representation of self to world - substitutes include myspace, most social
networks, ect

asian markets have different preferences for representation of self than those
facebook emphasizes.

facebook is having troubling scaling globally AND they plan to monetize on
only advertising.

those employees made out nicely.

~~~
netcan
True, and neither of those are money-makers. The whole 'we'll make money off
it with advertising later' has failed many times. Search is the exception not
the rule.

Until I actually saw some innovative advertising method making advertisers
money and getting an excited response in that community, I'd be sceptical that
they can do more with a pageview then NYT.com or About.com or any other
'site.'

At banner ad monetisation rates, that would probably put them at around the
$50m - $500m p/y mark.

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prakash
Apparently linkedin is doing it as well!
[http://venturebeat.com/2008/08/04/linkedin-like-facebook-
is-...](http://venturebeat.com/2008/08/04/linkedin-like-facebook-is-letting-
employees-sell-some-stock-early/)

This seems in between an IPO and an acquisition, it would be nice to see more
startups taking this route.

~~~
hugh
It seems like a dangerous route to take, to make some of your key employees
rich before there's a proper liquidity event. I can only imagine what it will
do to their motivation and to the internal politics of the company.

Of course, very few startups find themselves in this position anyway, being
worth billions but with no interest in selling at the moment.

~~~
prakash
That's one way to look at it, and I am sure some employees might leave after
this. The other way to look at it is that it re-energizes the workforce and
the early employees, makes them stick around longer, and gives some hope to
the other employees that have joined later.

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netcan
I'm not really literate in the technicalities but something doesn't add up.

The preferred stock deal with MSFT values the company at $15b 'internal
valuation' that the shares were issued at is $4b. Aren't these supposed to be
approximations of the same thing, roughly?

Does that means that they can't go public with a valuation lower then $15b?

That MSFT deal seems insane. Facebook would have to be an advertising
powerhouse.

~~~
brianlash
As I understand it the valuation at the time of the Microsoft deal was
meaningless, at least as far as other shareholders go. Their move was based on
an effort to "get into social networking," not a strategic long-term
investment.

I could be wrong. But I think that's a believable story, especially in light
of this news around FB's own (much lower) internal valuation.

~~~
netcan
Makes sense. I guess they pay an evil premium.

But wouldn't they have something written into the deal that they can't sell
the company at a valuation lower then the preferred stock price? Isn't that
what preferred stock means.

I suppose that there would be no restrictions on buying at a lower valuation.

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icky
> Facebook has said it’s not planning to IPO anytime soon

Exactly how do they plan to let employees sell stock without accidentally
becoming a public company?

Is this stock being sold back to the company itself?

~~~
superchink
Most likely, it involves private internal trading between employees. Those
that would rather just take the cash and run can sell their stock to others
who would like to invest more into the company.

~~~
hugh
_Most likely, it involves private internal trading between employees_

Where would the money come from? Very few facebook employees are rich in cash.

