Facebook and Zynga Discourages Pre-IPO Sales, While Investor Plans to go Public
To keep investors and employees (private shareholders) from selling their shares too soon, Zynga and Facebook are putting stipulations, charging $2500 for anyone that wants to sell their shares in the company. Zynga imposes a $6000 fee while Facebook $2500 for each share.
Social site game developer Zynga first imposed a $4500 fee as of August, and raised it to $6000 by September. Facebook began imposing a $2,500 fee as well, according to Greg Brogger, CEO of SharesPost Inc., which handles private-company stock sales. Online trading of employee stock will trigger a difficulty in management to control ownership and will carry high administrative costs. With 500 shareholders, the company is prone to financial disclosure prior to the IPO, which the companies prefers to be private.
“The fee is being imposed for the administrative burden of providing the information that the seller by law is required to provide, and making sure the company is not screwing up its 500 shareholder count,” said Ted Hollifield, a partner at Dorsey & Whitney LLP law firm in Palo Alto, California. He said he is not working on behalf of Facebook or Zynga.
It’s yet another step towards achieving an IPO for Facebook, which has been steeped in speculation since it first became popular a few years back. With hopes of an IPO in the next two years, Facebook is taking serious steps towards protecting its shares leading up to offering public trade.
Though Facebook has put these stipulations on its private shareholders, one investor is going public itself. Mail.ru, a Russian web service with a small stake in Facebook, announced this week its own plans for an IPO. Mail.ru also has investments in Zynga and Groupon.
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