Facebook Inc. isn't publicly traded yet, but that hasn't stopped investors like Leon Cohen from trying to buy the social network's stock now.
The 83-year-old resident of Aventura, Fla., would like to purchase 10,000 or more of Facebook's private, before-initial-public-offering shares. For the past two months, Mr. Cohen said he has been lingering by the phone "like a lady in waiting" to get his hands on Facebook stock through a broker.
"We expect Facebook to do very well in the aftermarket," he said, referring to the expected public trading of the stock, "so I want to get in and buy the stock before it comes out." Mr. Cohen, who retired 15 years ago after selling a lighting-fixtures company in Brooklyn, N.Y., last year bought shares of Zynga Inc., Groupon Inc. and LinkedIn Corp. at their IPO prices through a different broker. After weeks of fruitless waiting for pre-IPO Facebook shares, he also has begun seeking them through private-market auctions.
Strong interest from investors wanting to get in early has sparked a 24% surge in Facebook's share price on the "secondary market" for private-company shares since just before the social network filed on Feb. 1 for an IPO. As of February 22, Facebook's per-share price on the secondary market was $42, up from $34 on Jan. 20, according to SharesPost Inc., which regularly conducts auctions of private-company shares. That has boosted the company's indicated value to about $105 billion.
Facebook's trajectory in private-company trading underscores the immense appetite for the social network's stock. The price rise since its IPO filing is outpacing that of other Web companies after they filed for their IPOs last year, according to some brokers and people familiar with the matter.
The Menlo Park, Calif., company's IPO, likely this spring, is expected to raise $10 billion in what would be the biggest-ever U.S. Internet IPO. Facebook declined to comment.
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The early interest in the shares is driven by several factors. For one, some investors believe the offering price will be higher than where the private shares are trading now. Buying now, they say, represents a chance for even greater profits than the typical first-day trading "pop" of a sought-after stock.
Also, getting Facebook shares at the IPO price from a broker isn't expected to be easy, say industry participants.
While Wall Street brokers typically allocate 10% to 20% of an IPO to individual investors, they tend to save the hottest ones for their best customers, those with a track record of buying—and holding—IPOs of other stocks.
Not that snagging Facebook stock before the IPO is simple. Purchases are typically arranged from former Facebook employees and early-stage investors through a network of brokers that has sprung up in the past few years. Many of these brokers have their own proprietary sources in legal, financial and technology circles. Some current holders may want to sell before the 180-day post-IPO "lockup" period, during which insiders and investors generally aren't permitted to sell their stock.
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"Everybody is crazed with Facebook," but "shares are concentrated with a few credible sources," said Judith Feder, a broker at du Pasquier & Co. who said she has arranged more than a dozen private-market sales of Facebook stock over the past year. "I call it the Facebook diet. I don't remember the last time I had dinner" because of the investor frenzy, Ms. Feder said.
Joshua Max Davis, president and founder of Spirit of Women, which offers marketing services to hospitals and pharmaceutical companies, said he bought Facebook shares in the past few months through a family member who acts as a broker on secondary market trades.
Mr. Davis, 38, who lives in Delray Beach, Fla., said he uses Facebook daily to "stay connected" with his own network of 850 "friends," and to get the word out about some of his company's events. He said Facebook stock is a good bet partly because "I don't know any business where the users are as loyal."
It isn't just individual investors who are seeking Facebook shares before the IPO. Kevin Landis, chief investment officer at the $85 million technology fund Firsthand Capital in San Jose, Calif., earlier bought Facebook shares at about $31 a share through a private transaction.
On Friday, Mr. Landis's fund said it completed the purchase of an additional 50,000 shares of Facebook stock through the secondary market, bringing the fund's total holdings to 200,000 shares of Facebook, currently the fund's biggest position.
"Whatever you think Facebook is worth today, it's going to be worth more once it's publicly tradable," Mr. Landis said.
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Facebook had profit last year of $1 billion on revenue of $3.71 billion. The company is growing fast, with revenue rising 88% from 2010. The social network's membership continued to grow, topping 845 million at the time of the IPO filing, a 39% increase from a year earlier.
Not all investors are getting swept up. Kenny Bott, 55, a financial consultant in Las Vegas who already has a stake in some Facebook shares through a fund, said he got a call earlier this month from investors offering to sell him shares of Facebook stock that had been purchased on the secondary market. But he said he declined because "this whole fervor has gotten away from everybody and reality needs to settle in."
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