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