Social Networking Titan Facebook is the most favorite for investors seeking to own a pie of a high flying privately held Internet Company especially after the recent valuation of $50 Billion by Goldman Sachs. Following the foot marks, another micro social blogging website Twitter Inc, which had raised $200 million last month at valuation of $3.7 billion, has been scaled up with the latest valuation of $4.1 billion.
However, both the companies ( Facebook & Twitter) are, apparently, adopting the “special purpose vehicle” formula which will allow them to engage multiple investors at the count of one. Similar to Goldman Sachs, another New York based Investment Company – Felix Investments – is setting up a situation where multiple small investors can reach to Twitter without having their presence in Twitter’s Investors list.
According to an email, sent to prospective investors by Felix Investments, a new fund called Pipio Associates 1 LLC has cropped recently, responding to the seemingly insatiable demand from investors seeking to get a piece of fast-growing Internet companies that have so far refrained from going public.
Email quotes, “We are closing next week on our Twitter fund (Pipio Associates). This stock is series C and it is priced at $22 per share which is an implied valuation of $4.1 billion. That is just $200 million more than the value Kleiner Perkins just put their $150 million in. Our next close after this will be $26 per share. If you do not own stock in Twitter already it is a must. If you already own Twitter you need to add to your position. There are two absolute must have positions – Facebook and Twitter! This is the first Twitter stock we or anyone else has had in the past six months and like Facebook it will continue to trade up in price rapidly!”
The email does not reveal the fund’s closing target, but SEC filings state targets of $25 million each for Pipio Associates 1 and Pipio Associates II LLC. “Pipio” is Latin for Tweet.
These special purpose funds offer investors who are smaller than the typical large institutional investors the opportunity to buy into hot pre-IPO companies. The minimum amounts to invest, however, vary. Some funds are targeting individuals who can invest as little as $100,000 while others are targeting larger individual or institutional investors. Goldman is reportedly telling clients it can buy equity in Facebook for a minimum of $2 million.
With the frenzy over these private companies, the SEC has been examining how these funds are valuing shares of private companies as well as potential breaches of financial reporting rules by technology companies. Another issue is whether the funds enable the companies to skirt the 500-investor limit after which a company must publicly file financial information.
