If you follow tech news, you’ve probably heard that Facebook was once valued at $15 billion, and that Twitter is worth around $1 billion. Normally, such estimations are impossible to make because they rely on information from financing rounds that usually remains confidential. It takes a leak or an investment from a public company for such valuations to make it out into the public.
SharesPost, a
trading platform for private company stock, hopes to change all that with an index it’s launching today that puts a pricetag on some of the biggest venture-backed private companies, based on data it gathers from the buying and selling of private company stock.
In the last two years, as private tech giants like Facebook and Zynga have chosen to declined to file for an IPO or be acquired (events that would let shareholders cash in their stock), some investors and employees have become anxious to sell their equity for cash. Afterall, we’re going through tough times and lots of folks could use some real money. Because of the demand for liquidity, the secondary markets for private-company stock became so active that they were organized into platforms like private-company stock exchange SecondMarket, and trading platform SharesPost. By organizing the secondary market transactions, these companies have become privy to the sale price of shares–and voila!: another way to value private companies has emerged: simply look the prices at which people are buying and seling the company’s stock.
SharesPost is now taking that data, averaging it with other available valuation data, and publishing an index of estimated values of some of the most well-known venture-backed companies. The index is launching with seven companies that have seen a lot of shares traded through the platform: Facebook, Linden Lab (the makers of SecondLife), LinkedIn, Serious Materials, Tesla Motors, Twitter and Zynga.
The index value of a company will be based on four types of figures: the dollar amount of the last stock purchase; the average of the current offers to sell and to buy company shares; valuations from research firms (the site has six firms signed up as partners and plans to bring on two more soon); and valuations from financing rounds (when available).
SharesPost says it has seen activity on the site accelerate in recent months. CEO Gregg Brogger says the platform has “connected buyers and sellers directly in the negotiations of more than $229 million worth of transactions and seen more than $300 million worth of posts to buy and sell.”
Brogger admits the valuations won’t be as perfect as those an investment bank like Goldman Sachs can produce for a public company, but he says they’ll be a lot better than guesses based on a company’s last investment round.
As the platform grows, the SharesPost plans to break out subindexes for sectors like biotech, infrastructure, and mobile.
The SharesPost Index is available here and requires a free membership to view.
