Pricing Facebook: Writing's Not on the Wall

Facebook's plan to provide liquidity to employees holding stock options in a weak initial public offering market poses a tricky issue for placing a value on the social networking giant in the event they eventually sell the business or go public.

The popular site -- the fourth most trafficked Web site in the world, according to comScore -- is a private company whose valuation has been estimated to be anywhere between $2 billion and $15 billion. Microsoft(MSFT Quote) invested roughly $246 million for a 1.6% stake, placing the company at the high end of that range. But blogger Jesse Chan, writing on FishTrain.com, did an exhaustive analysis based on numbers the company has made public and places the value at roughly $2.6 billion.

Facebook Status Update: Selling Stock

While Facebook has exhibited a strong desire to remain independent for the time being, a plan to allow employees to sell some stock offers one way to measure how the company values itself. And the number is much lower than the premium Microsoft paid for its stake.

With the IPO market in the doldrums, tech start-ups are finding that the carrot they offered their employees, private stock, is looking less attractive without an outlet to turn it into cash. So the company is among several of its peers lining up buyers and offering employees a chance to sell some of their holdings based on a valuation of $4 billion.

Facebook walks a fine line. It doesn't want to set its value too high when pricing the employees' stock, yet it definitely wants to value itself highly if and when it looks to cash out in a merger or IPO.