Easy Facebook money already made

SAN FRANCISCO (MarketWatch) — In comparing the pending Facebook IPO to Google’s 2004 stock offering, investors should keep one very important difference between the two in mind: While Google’s IPO truly was an initial offering of stock to noninsiders, the same can’t be said of Facebook’s.
Facebook shares have been trading for several years now on private, secondary markets that cater to wealthy investors. The liquidity that those markets provided is what allowed Facebook to achieve its lofty valuation — and raise a massive amount of capital before it had even filed its first IPO documents.
Because Facebook insiders who wanted to sell portions of their stakes — and the investors who were determined to buy them — have already done so, the easy money in Facebook shares has already been made.
The great disparity in the amount that Google (US:GOOG) and Facebook (whose intended ticker symbol is “FB”) raised before their respective IPOs shows that a comparison of the two offerings is not an apples-to-apples one.

Before it executed its IPO, Google had raised just over $25 million from a few angel investors and the noted venture-capital firms Sequoia Capital and Kleiner Perkins Caufield & Byers. Facebook, by contrast, has already raised approximately $2.3 billion from a broad group of investors in at least 10 rounds of financing. That’s more than the $1.67 billion Google raised in its IPO.
Here’s another way to look at it: More than five years passed between Google’s $25 million venture round in June 1999 and its IPO in August 2004. That time span meant that anyone buying an IPO share of Google was capturing five years’ worth of value creation. That value had been unrealized because no market existed for the company’s shares.
By contrast, Facebook raised its last round in January 2011 — a $1.5 billion financing that valued the company at $50 billion — which means all the value created by the company up until that time has already been priced into its shares.
By historical standards, even the relatively recent history of Internet stock offerings, the size of Facebook’s previous funding round means that the company essentially has already conducted an offering of stock to a broad pool of outside investors.
Given the fierce competition last year among venture-capital firms and other private investment outfits, including deep-pocketed overseas ones such as Digital Sky Technologies, you could make a strong argument that its last round included a bubble premium.