Is Facebook losing its value?

Aug 25, 2011

Dan Primack was a senior editor at Fortune from 2010 to 2016. He was also the author of Term Sheet, Fortune's daily newsletter about deals and dealmakers.

Has Facebook finally hit a valuation peak?



For the past several years, there have been three things you could count on: Death, taxes and Facebook gaining in value. Now we might have to return to the old standbys.

Facebook recently suffered its first-ever consecutive decline in valuation on the private secondary markets, according to a report being released later today by research firm PrivCo.

The data is broken out into two-week periods, and shows that Facebook spent the better part of June and July trading at $35 per share, for a company valuation of approximately $84 billion. That price fell on July 29 to $34 per share and then to $33 per share for the period ending August 16. Overall, that brings Facebook back to its March 2011 valuation of $79.2 billion. Obviously nothing to sneeze at, but also not the sort of direction that should give Facebook total confidence in a $100 billion IPO value next year (based on assumption that private markets typically trade at a 20-30% discount to public comps).



"In effect, investors would have been better off buying a treasury bill in February with a small fraction of the risk and total liquidity," says PrivCo CEO Sam Hamadeh.

Joseph Ranzenbach, vice president of operations at PrivCo.com, adds: “Insiders, who know better than anyone what the internal business trends are, have are clearly now more willing sellers as reflected by the recent consecutive stock price drop in secondary markets."

PrivCo attributes the recent drop to competition from Google, which recently launched its Google+ service, and general "Facebook fatigue" among users. There also are the social network's continuing privacy issues, which it plans to address today by rolling out new security controls.

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