General Atlantic, the $17 billion Greenwich-based private equity firm, just brokered a deal that values Facebook at $65 billion. If it closes, the deal wouldn't be a direct investment funding Facebook. Rather, General Atlantic wants to splurge on a block of roughly 2.5 million shares of stock from former employees on the secondary market for the high, high price of $65 million in order to claim one tenth of one percent of Facebook. Mark Zuckerberg would be giving up only a small portion of equity that was in his employees' hands anyways, and people now think Facebook is worth 30 percent more than it was just since last month. So why wouldn't he be thrilled?
General Atlantic is just the latest investor to find itself overtaken by Facebook fever roiling the secondary markets, where early employees and investors go to sell their shares and cash out without waiting for an IPO. The process has gotten "ferocious," says CNBC, "requiring calls to numerous ex-employees and large holders of the stock from its early days." In fact, according to TechCrunch, General Atlantic tried to do the same thing with Twitter during a $100 million bidding war for co-founder Evan Williams's shares. Business Insider says:
There's clearly a trend among fund managers that they want to be able to brag that they have Facebook stock. This seems to be what this is about.
The potential problem for Zuckerberg is that the more shareholders he has, the closer he gets to the SEC's 500-shareholder cap, after which he has to turn over more financial information on Facebook. That's part of the genius of Goldman's special-placement vehicle that lets Lloyd Blankfein's private clients invest as one. Plus with Facebook gearing up for an IPO in 2012, he'd probably rather not trifle with the secondary market. Luckily Zuckerberg has right of refusal on all secondary sales.
He also has a big fan in the U.S. Senate. Fresh from a trip to the Middle East, Senator John McCain gave a talk at the Brookings Institution to talk about Tunisia, Egypt, Bahrain, and Libya. But what he really ended up talking about was Mark Zuckerberg, calling him the most popular man in the Middle East. Huh. More popular than Wael Ghonim? The Google exec who used Facebook to air his political views and foment the revolution? John McCain, come out from that imitation Zuckerberg hoodie right now. We are trying to talk to you!