Pricing Facebook: Writing's Not on the Wall

In a recent Business Week article, Facebook declined to outline how the employee stock sales would work. Barry Silbert of Restricted Stock Partners says his firm is the largest secondary market for the private Facebook stock. Anyone can sell Facebook shares through the system, but only qualified investors, mostly institutional, can buy them. Facebook has first right of refusal for each transaction.

Without information such as the amount of shares outstanding, it is difficult to put an exact price on Facebook. But the sale of blocks of shares through Restricted Stock Partners suggests the company is worth roughly $9 billion, Silbert says.

On the other hand, venture capitalist Fred Wilson speculates that Microsoft never intended its investment to form the basis of a valuation for Facebook. Wilson, whose Union Square Capital is not invested in Facebook, wrote on his blog that Microsoft's paid a premium to forge a strategic relationship it coveted. Conversely, he argued, the amount employees are getting for their stock represents a discount to what is likely a $7 billion price tag on the company.

"And those kind of discounts are what buyers of secondary private shares usually demand," Wilson wrote. "They are purchasing stock that cannot be resold easily and they are becoming shareholders in a company that they will have basically no ability to control or impact."

Other Web companies are in the same boat as Facebook. The popular professional networking site Linked-In also is helping employees cash out up to 20% of its stock, as is matchmaking site eHarmony, Silbert says.