Facebook trade halt prompts IPO rumours
Rumours of an imminent Facebook initial public offering swirled on Wednesday after a report said trading in the company's shares has been halted in the private market for company insiders.
Citing unnamed sources familiar with the situation, Bloomberg reported Wednesday that buy and sell orders for company shares on the unlisted securities market will not be processed between Wednesday and Friday this week.
"This is the most legitimate, verifiable sign that we've seen yet [of an IPO]," Sam Hamadeh, CEO of research firm PrivCo, told CBC News in an interview.
Facebook is planning to sell 10 per cent of its shares in a public listing some time this year. It's believed the company wants to raise $10 billion US in an IPO, giving the world's largest social network site a total value of $100 billion US.
Although the company is yet to trade publicly on the New York Stock Exchange or any other bourse, Facebook shares exist on what's known as the "over-the-counter" or "pink sheet" market. They are held by company insiders and investment banks. If an IPO occurs, those shares will then be flipped to the general public.
'This is the most legitimate, verifiable sign that we've seen yet.' —Sam Hamadeh, CEO of PrivCo
Though much more common on unlisted markets than on public ones such as the TSX, trading halts are a clear sign that something is brewing, Hamadeh said.
"We've been asked about this for about two years now and our instinct has always been that the timing wasn't right," Hamadeh said. But the nature and duration of the halt suggests an IPO might be imminent, he said.
Sellers on unlisted markets are almost always insiders, so a halt is usually employed when a company wants to make sure it can't be accused of doing anything untoward in advance of major material news. "In the past, the rumours were all started by wishful thinking from insiders who were eager to sell to the public, trying to hype it," Hamadeh said.
PrivCo's analysis of the 31,000 companies in their coverage universe reveals that the third or fourth week following the end of a quarter is the preferred time to start an IPO process. "That give you a nice runway to take off from without having to worry about other amendments," Hamadeh said.
Facebook's financial year ended on Dec. 31, 2011, so the weeks beginning Jan. 21 or 28 would fit that timeline.
"This time I would say not only maybe, but probably," Hamadeh said. "Something big is going to be announced."
Facebook has thus far declined to comment on the report.