"Facebook is a blue-chip stock and it's not even public yet," said Kevin Landis, portfolio manager for the Firsthand Technology Value Fund in San Jose, Calif. Facebook jumped as high as $44 this month in private trading, valuing the company at $103 billion and leaving it higher than when Landis bought stock at about $30 to $31 in October. He said he aims to add to his holdings.
While demand for the biggest Internet IPO on record may push the stock even higher when Facebook goes public, private trades through channels such as SecondMarket Inc. and SharesPost Inc. are already making it possible for employees and venture capitalists to cash out. That may have lessened pressure on chief executive officer Mark Zuckerberg to hold an IPO before this year.
Facebook, which filed for an initial share sale this month, has yet to set its price range for the IPO. People with knowledge of the matter said earlier this year that Zuckerberg was weighing a valuation of as much as $100 billion. Larry Yu, a Facebook spokesman, declined comment.
The private trading may make Facebook's debut more like a secondary offering, where holders sell stock in an already public company, said Barry Ritholtz, CEO of FusionIQ, an equities research firm.
"The people buying now at the IPO price are presuming there's lots of upside - I'm skeptical," said Ritholtz, whose firm is based in New York. "There's a lot of smart money agitating for the highest possible valuation, and they don't necessarily have the investing public's best interest at heart."
Insiders and investors with $1 million of net worth and a salary of more than $200,000 can qualify to buy stock on private marketplaces, according to Securities and Exchange Commission rules. In an auction this week on SharesPost, Facebook stock had a clearing price of $42, valuing the company at $98 billion.
The shareholders who got into Facebook earliest - including the hundreds of employees who received restricted stock units as part of their compensation packages - will see the most gains, said Larry Albukerk, a broker of private securities.