Did the LinkedIn IPO cause Facebook’s valuation to surge for a short period of time? That appears to be the case on secondary market sites SecondMarket and SharePost where the company’s shares jumped up for a brief period in May to $34, a site valuation of $85 billion before eventually falling back into place at $31.50.
The premise behind the jump is simple, investors witnessed a LinkedIn P/E ratio of 2,500, while LinkedIn shares nearly doubled the company value during the first day trading. With such a large market valuation on a company that performs nowhere near the level of Facebook it shouldn’t come as a surprise that investors began to quickly gauge Facebook stock valuation on the secondary market.
The $35 share price for 100,000 shares of Class B Common Stock in Facebook, Inc. was relayed to SharePost members in the following post:
We are writing SharesPost members like you who indicated they would like to occasionally receive news from SharesPost.
We would like to inform you that SharesPost’s affiliated broker-dealer completed its auction of 100,000 shares of the Class B Common Stock of Facebook, Inc. yesterday, May 26th. A clearing price of $35.00 was established at the auction. Members submitting Qualifying Bids at or above the clearing price will be contacted shortly with instructions on next steps for completing this transaction.
It’s still uncertain if Facebook will debut with double expected earnings when the company eventually announces their IPO, however if they do we could be witnessing the first tech company to debut over $100 billion in first day trading.
To put that number into perspective when General Motors released their new IPO in 2010 they received $23.1 billion, approximately 25% of the valuation of Facebook.