Face­book, Groupon lead 54pc rise in value of pri­vate com­pa­nies

The Pak Banker - - Company& -

SAN FRAN­CISCO: Face­book Inc., Groupon Inc., Twit­ter Inc. and other top ven­ture-backed Web com­pa­nies have seen their com­bined value rise 54 per­cent since June, as in­vestors race to buy stakes in so­cial-me­dia star­tups, ac­cord­ing to Nyppex LLC.

Face­book's value, based on the prices in­sti­tu­tions are bid­ding for pri­vately held shares, has climbed 56 per­cent to $41.2 bil­lion as of Dec. 1, Nyppex said to­day in a re­port. Groupon's val­u­a­tion quadru­pled to $4.8 bil­lion, while Twit­ter more than dou­bled to $3.71 bil­lion.

Nyppex pro­duced the re­search for money man­agers, ven­ture funds and cor­po­ra­tions that want a piece of Web star­tups, said Lau­rence Allen, man­ag­ing mem­ber at the firm. He fo­cuses on so-called sec­ondary trans­ac­tions-deals that in­volve buy­ing stock from ex­ist­ing share­hold­ers, in­clud­ing em­ploy­ees, rather than di­rectly from the com­pany. Nyppex es­ti­mates that sec­ondary-trans­ac­tion vol­ume will more than dou­ble this year to $4.9 bil­lion as com­pa­nies de­lay ini­tial pub­lic of­fer­ings.

"This trend will cre­ate even more pres­sure on port­fo­lio man­agers to eval­u­ate how to par­tic­i­pate in grow­ing pri­vate com­pa­nies," said Allen, whose firm is based in Rye Brook, New York. "We get new buy or­ders weekly from in­sti­tu­tions try­ing to buy sec­ondary shares in pri­vate so­cial-me­dia com­pa­nies for the first time."

The Nyppex re­port re­flects ef­forts to glean deeper in­sights into com­pa­nies that aren't re­quired to dis­close quar­terly re­sults, open­ing the busi­nesses to a wider range of would-be in­vestors.

Nyppex mea­sured the value of 11 In­ter­net com­pa­nies. The firm looked at how much in­sti­tu­tions are of­fer­ing for shares, along with what in­di­vid­ual, or re­tail, in­vestors are pay­ing. Re­tail in­vestors, who have more limited ac­cess to shares, paid a 31 per­cent pre­mium com­pared with in­sti­tu­tions, up from 12 per­cent in June.

The re­port also of­fers an­nual rev­enue pro­jec­tions for each com­pany through at least 2012, and es­ti­mates for fi­nan­cial data, in­clud­ing cash bal­ances, debt and num­ber of shares out­stand­ing, where avail­able. Twit­ter's sales, for in­stance, will more than dou­ble to $300 mil­lion next year, Nyppex es­ti­mates.

Nyppex is part of a grow­ing num­ber of firms that are pro­vid­ing fi­nan­cial in­for­ma­tion on pri­vate com­pa­nies and help­ing fa­cil­i­tate trades of their stock. Se­condMar­ket Inc. opened a mar­ket­place for sec­ondary shares last year, as did SharesPost Inc., which bro­kers trades and pro­vides es­ti­mated val­u­a­tions.

Es­ti­mates of Face­book's val­u­a­tion can vary widely. A re­cent SharesPost auc­tion pegged its worth at $56.7 bil­lion, the on­line mar­ket­place said to­day. The auc­tion in­volved 165,000 shares at a price of $25, ac­cord­ing to the Santa Mon­ica, Cal­i­for­ni­abased firm. "You have an in­creas­ing num­ber of won­der­ful com­pa­nies that have al­ready proven they have a lot of value," said Eric Jack­son, who co-founded CapLinked Inc. last year to help pri­vate com­pa­nies and in­vestors con­nect on­line. "Peo­ple nat­u­rally want a chance to in­vest in a com­pany like that."

Even as Nyppex tries to dig deeper into the world of pri­vate com­pa­nies, there are lim­its to the amount of in­for­ma­tion it can pro­vide. For ex­am­ple, the firm doesn't list a cash bal­ance for some of the star­tups, in­clud­ing Groupon, Yelp Inc. and Zynga Game Net­work Inc.

Twit­ter, the San Fran­cis­cobased mi­croblog­ging ser­vice, said this week that it raised $200 mil­lion in ven­ture cap­i­tal, valu­ing the com­pany at $3.7 bil­lion. -Bloomberg

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