December 29, 2010

SEC Looking In To Social Network Trading

According to media reports, the Securities and Exchange Commission (SEC) is looking into trading in privately-held Internet companies like Facebook and Twitter.

The Wall Street Journal reported that the SEC has sent letters to several people trading in the stock of these companies, seeking information about topics that include how such funds are valuing shares of those firms.

A growing group of online trading services like SharesPost and SecondMarket facilitate share trading of unlisted Internet firms.

The newspaper said the probe is in a preliminary stage and appears to be partly focusing on funds that have been set up to allow investors to trade in private companies.

The regulator may also investigate how the existence of funds affected an SEC rule that states that private companies must have fewer than 500 shareholders, or else publicly disclose significant financial information.

The Financial Times said that this was part of the reason Google Inc. went public in 2003.

The report said that the implied value of Facebook has risen over 50 percent, while the value of Twitter has doubled.

The Financial Times also reported that early employees and investors in private companies have recently been selling their stock to buyers who want exposure to these fast-growing enterprises.


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